Reading 46: Discounted Dividend Valuation - LOS b ～ Q1-3

答案和详解如下：

1.Which of the following statements about dividend discount models (DDM) is FALSE?

A)   The DDM can be applied to all firms.

B)   A DDM can be broken into several stages of growth.

C)   The H-model is a two-stage growth model.

D)   The DDM can only be applied to firms that currently pay dividends.

The correct answer was D)

Although it is seldom used by analysts for this purpose, the DDM can be used to value any firm, even those that are not paying dividends. The future dividends must be projected as to amount, timing and growth; and this is difficult to do with confidence for some firms.

2.A dividend discount model (DDM) is most appropriate for a:

A)   firm in the mature stage of the industry cycle.

B)   firm in the early growth stage of the industry cycle.

C)   start-up firm.

D)   firm with unstable growth prospects.

The correct answer was A)

The DDM is most appropriate for firms that have predictable dividend payouts. Mature firms generally have stable growth prospects that allow forecasting of dividends with some confidence.

3.The Gordon dividend discount model (DDM) assumes:

A)   a variable growth rate for future dividends.

B)   all earnings will be paid out in the form of dividends as they are earned.

C)   no change in the amount of dividends in the future.

D)   a constant growth rate for future dividends.

The correct answer was D)

The Gordon DDM is also known as the constant growth model, because it assumes that dividends will continue to grow at a constant rate. It is most appropriate for a stable, mature firm.