question archive The dividend discount model is commonly used to value common shares
The dividend discount model is commonly used to value common shares
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The dividend discount model is commonly used to value common shares. Which of the following is a limitation in applying the model?
1) Dividends to be paid by the company is assumed to be either constant or based on a constant growth.
2) Future dividends are subject to the company's future performance.
3) Estimation of the company's growth rate is projected based on past data.
4) All of the above
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Answer
- 4) All of the above
Step-by-step explanation
The dividend discount model is commonly used to value common shares are having limitation:
- Dividends to be paid by the company is assumed to be either constant or based on a constant growth.
- Future dividends are subject to the company's future performance.
- Estimation of the company's growth rate is projected based on past data.
