A Major Difference Between the Dividend Discount Model (DDM)and the Free

question 50

Multiple Choice

A major difference between the dividend discount model (DDM) and the free cash flow to equity model (FCFE) is that the FCFE:

• A)accounts for potential capital gains and the DDM does not.
• B)measures what a firm could pay out in dividends and the DDM measures what is actually paid.
• C)measures both dividend growth and stability and the DDM only measures the dividend growth.
• D)bases its calculations on future value techniques while the DDM uses present value calculations.

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Definitions:

Trade Barriers

Measures implemented by a country to restrict or regulate international trade, including tariffs, quotas, and import bans.

Absolute Purchasing Power Parity

It's a theory that suggests the exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.

Economic Values

The measure of the benefit provided by a good or service to an economic agent.

Foreign Currency Approach

A method that involves evaluating financial statements and investments in the context of foreign currency exchange rates and their fluctuations.