Question #99
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 39
Status: Unattempted
Correct Answer: B
Question
Which of the following is least likely a limitation of the two-stage dividend discount model (DDM)?
Answer Choices:
A. most of the value is due to the terminal value
B. Terminal value estimate is most sensitive to estimates of future dividends
C. the length of the high-growth stage is difficult to measure
Explanation
The Terminal value in two-stage DDM is most sensitive to estimates of growth and
required rate of return.