Question #106
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 41
Status: Unattempted
Correct Answer: A
Question
In what stage of growth would a firm most likely NOT pay dividends?
Answer Choices:
A. Declining stage
B. Transition stage
C. Initial growth stage
Explanation
During the initial growth stage, the firm is able to exploit opportunities to earn greater
than the required return. During this stage, earnings are reinvested in the growth
opportunities rather than returned to the investors.