According to course materials, the dividend growth model is simple to use but suffers from the following drawback(s):- A. It assumes a constant growth rate.- B. It is not easy to forecast the growth rate.- C. Both A and B- D. Neither A nor B

According to course materials, dividend growth model is simple to use but suffers from the following drawback(s): OA. It assumes a constant growth rate. OB. It is not easy to forecast the growth rate OC. Both A and B OD. Neither A or B

According to course materials, dividend growth model is simple to use but suffers from the following drawback(s): OA. It assumes a constant growth rate. OB. It is not easy to forecast the growth rate OC. Both A and B OD. Neither A or B

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

According to course materials, the dividend growth model is simple to use but suffers from the following drawback(s):

- A. It assumes a constant growth rate.
- B. It is not easy to forecast the growth rate.
- C. Both A and B
- D. Neither A nor B

Expert Solution

Step 1

The dividend growth model (or Gordon growth model) is one of the models used by investors to calculate the value of the stock at a specified time (say time 0) issued by a company. This model is used by many investors for valuing a stock.

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