Question #8
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 4
Status: Correct
Correct Answer: A
Question
Which of the following dividend discount models assumes a high growth rate with a linear decline to a lower stable growth rate?
Answer Choices:
A. Gordon growth model
B. H model
C. Three-stage dividend discount model
Explanation
The H model assumes a high growth rate during the initial stage, followed by a linear
decline to a lower stable growth rate. It also assumes that the payout ratio is constant
over time.