Dividend discount model : Dividend discount model is a scheme which value firm’s shares based on present value of future dividends. This method values the share by discounting the future dividend that is going to be paid by the company. Dividend: The amount that shareholders receive in return of their investment is called as a dividend. The dividend is paid according to the number of share of each shareholder. Preference shareholder receives a fixed rate of dividend but equity shareholders receive dividend only when there is a profit in the company. To determine: The use of dividend discount model with changing growth rates in future dividends.

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Chapter 7, Problem 5CT

Summary Introduction

Dividend discount model: Dividend discount model is a scheme which value firm’s shares based on present value of future dividends. This method values the share by discounting the future dividend that is going to be paid by the company.

Dividend: The amount that shareholders receive in return of their investment is called as a dividend. The dividend is paid according to the number of share of each shareholder. Preference shareholder receives a fixed rate of dividend but equity shareholders receive dividend only when there is a profit in the company.

To determine:

The use of dividend discount model with changing growth rates in future dividends.

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