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Basic Question 2 of 7
According to the dividend discount model the value of a stock is
B. The future value of an expected stream of future dividends.
C. The sum of all future dividends.
A. The present value of an expected stream of future dividends.
B. The future value of an expected stream of future dividends.
C. The sum of all future dividends.
User Contributed Comments 4
| User | Comment |
|---|---|
| chamad | I don't see the difference between A & C! can someone explain...thanks |
| VenkatB | The sum of all (Present Value of) future dividends C is missing the "present value" aspect |
| Oarona | well explained VenkatB |
| johntan1979 | Just recall the formula: Is V = sum of all future dividends, i.e. D1, D2, D3...? Nope, it's D/r-g |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
calculate the value of a common stock using the Gordon growth model and explain the model's underlying assumptions;
calculate the value of non-callable fixed-rate perpetual preferred stock;
calculate and interpret the implied growth rate of dividends using the Gordon growth model and current stock price;
describe strengths and limitations of the Gordon growth model and justify its selection to value a company's common shares;
CFA® 2026 Level II Curriculum, Volume 3, Module 21.