Question #20
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 8
Status: Correct
Correct Answer: B
Question
Which of the following dividend discount models (DDMs) is most appropriate for modeling a mature company?
Answer Choices:
A. Two-stage DDM
B. H-model
C. Gordon growth model
Explanation
The Gordon growth model assumes that dividends grow at a constant rate forever. It is
most suited for mature companies with low to moderate growth rates and well-
established dividend payout policies.