Question #68
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 26
Status: Unattempted
Correct Answer: B
Question
Methods for estimating the terminal value in a DDM are least likely to include:
Answer Choices:
A. PVGO
B. the market multiple approach
C. the Gordon Growth Model
Explanation
No matter which dividend discount model we use, we have to estimate a terminal value at
some point in the future. There are two ways to do this: using the Gordon growth model
and the market multiple approach (i.e., a P/E ratio).