Question #40
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 17
Status: Correct
Correct Answer: B
Question
If we increase the required rate of return used in a dividend discount model, the estimate of value produced by the model will:
Answer Choices:
A. increase
B. decrease
C. remain the same
Explanation
The required rate of return is used in the denominator of the equation. Increasing this
factor will decrease the resulting value.