Reading 46: Discounted Dividend Valuation - LOS m ～ Q1-7

答案和详解如下：

1.The Gordon growth model will NOT work when the:

A)   required rate of return is greater than growth rate.

B)   growth rate of the firm is zero.

C)   growth rate is greater than or equal to the required rate of return.

D)   growth rate is less than the required rate of return.

The correct answer was C)

The Gordon growth model, P₀ = DPS₁/ (r - g), will not work if the growth rate is greater than or equal to the required rate of return.

2.If the growth rate in dividends is too high, it should be replaced with:

A)   average growth rate of the industry.

B)   geometric mean of historical growth rates.

C)   a growth rate closer to that of GDP.

D)   growth rate in earnings per share.

The correct answer was C)

A firm cannot, in the long term, grow at a rate significantly greater than the growth rate of the economy in which it operates. If the growth rate in dividends is too high, then it is best replaced by a growth rate closer to that of GDP.

3.The Gordon growth model is well suited for:

A)   utilities.

B)   telecom companies.

C)   high-tech firms.

D)   biotech firms.

The correct answer was A)

Gordon growth model is best suited to firms that have a stable growth comparable to or lower than the nominal growth rate in the economy and have well established dividend payout policies. Utilities, with their regulated prices, stable growth and high dividends, are particularly well suited for this model.

4.Which of the following would NOT be appropriate for the Gordon growth model?

A)   High-tech start-up firm with no dividends.

B)   Mature, slow growth automotive manufacturer.

C)   Piano manufacture experience slow but consistent growth.

D)   Regulated utility company.

The correct answer was A)

The Gordon growth model is inappropriate for a firm with supernormal growth that cannot be expected to continue. A multistage model is appropriate for such a firm.

5.Which of the following would NOT be appropriate to value a firm with two expected growth stages? A(an):

A)   H-model.

B)   Gordon growth model.

C)   two-stage model.

D)   free cash flow model.

The correct answer was B)

The Gordon growth model would not be appropriate for a firm with two stages of growth but is useful to value a firm with steady slow growth.

6.Applying the Gordon growth model to value a firm experiencing supernormal growth would result in:

A)   understating the value of the firm.

B)   overstating the value of the firm.

C)   a valid estimate of the firm's worth.

D)   a zero value.

The correct answer was B)

Applying the Gordon growth model to such a firm would result in an estimate of value based on the assumption that the supernormal growth would continue indefinitely. This would overstate the value of the firm.

7.Which of the following dividend discount models is most suited for firms growing at a rate less than the overall growth rate in the economy, with well-established dividend payout policies?

A)   H model.

B)   Two-stage dividend discount model.

C)   Gordon growth model.

D)   Three-stage dividend discount model.

The correct answer was C)

The Gordon growth model assumes that dividends grow at a constant rate forever. It is most suited for firms growing at a rate less than the overall growth rate in the economy, with well-established dividend payout policies.