Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 8 of 16
The constant-growth dividend discount model would typically be most appropriate in valuing the stock of a ______.
B. rapidly growing company
C. moderate-growth, "mature" company
D. company with valuable assets not yet generating profits
A. new venture expected to retain all earnings for several years
B. rapidly growing company
C. moderate-growth, "mature" company
D. company with valuable assets not yet generating profits
User Contributed Comments 5
| User | Comment |
|---|---|
| cong | Because high growth rate (above requried return) cannot be sustained forever, which violates the assumption of Gordon's model. |
| tochiejehu | YES DATS RYTE CONG |
| praj24 | Ref! we just need some consistency up in here! - constant growth rate = C (satisfies the criteria) Blame it on Caffeine... ayyy that begins with a C (losing my mind) |
| khalifa92 | for growing companies, we use three-stage DDM |
| walterli | constant growth company ?? |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models
calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate
identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate
explain advantages and disadvantages of each category of valuation model
CFA® 2025 Level I Curriculum, Volume 3, Module 8.