Question
When assuming nonconstant growth in dividends, to avoid the problem of having to forecast and discount an infinite number of dividends, we must require that the dividends Blank______.
Multiple choice question.
start growing at a constant rate sometime in the future
always revert to zero after the third year
grow at different rates every year forever
grow at the exact growth rate of sales forever
Multiple choice question.
start growing at a constant rate sometime in the future
always revert to zero after the third year
grow at different rates every year forever
grow at the exact growth rate of sales forever
Answers
Answered by
GPT-4o mini
The correct answer is:
**start growing at a constant rate sometime in the future**
This approach allows for the use of a two-stage or multi-stage dividend discount model (DDM) where you can forecast dividends at varying rates for a certain period before assuming a constant growth rate thereafter, making the calculation manageable.
**start growing at a constant rate sometime in the future**
This approach allows for the use of a two-stage or multi-stage dividend discount model (DDM) where you can forecast dividends at varying rates for a certain period before assuming a constant growth rate thereafter, making the calculation manageable.