Reading 46: Discounted Dividend Valuation - LOS r, (Part growth

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1．If we know the forecast growth rates for a firm’s dividends and the current dividends and current value, we can determine the:

A)   net margin of the firm.

B)   sustainable growth rate.

C)   required rate of return.

D)   firm's beta.

2．If we increase the required rate of return used in a dividend discount model, the estimate of value produced by the model will:

A)   increase.

B)   decrease.

C)   remain the same.

D)   double for each 0.01 increase.

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答案和详解如下：

1．If we know the forecast growth rates for a firm’s dividends and the current dividends and current value, we can determine the:

A)   net margin of the firm.

B)   sustainable growth rate.

C)   required rate of return.

D)   firm's beta.

The correct answer was C)

Just as we can determine the current value of the shares from the current dividends, growth forecasts and required return, we can solve for any one of them if we know the other three factors.

2．If we increase the required rate of return used in a dividend discount model, the estimate of value produced by the model will:

A)   increase.

B)   decrease.

C)   remain the same.

D)   double for each 0.01 increase.

The correct answer was B)

The required rate of return is used in the denominator of the equation. Increasing this factor will decrease the resulting value.