Asked by Ibrahim Budak on May 07, 2024
Verified
When the constant dividend growth model holds, g = capital gains yield.
Constant Dividend Growth Model
A method to estimate the value of a company's stock, assuming that its dividends grow at a constant rate indefinitely.
- Perceive the consequences of changes in dividends, growth rates, and required returns on the worth of stocks.
- Acquire knowledge of the assumptions and restrictions of the constant dividend growth model.
Verified Answer
MM
Mirsada MuratovicMay 08, 2024
Final Answer :
True
Explanation :
In the constant dividend growth model, the growth rate of dividends (g) is equal to the capital gains yield, as both represent the rate at which the value of the investment is expected to grow over time.
Learning Objectives
- Perceive the consequences of changes in dividends, growth rates, and required returns on the worth of stocks.
- Acquire knowledge of the assumptions and restrictions of the constant dividend growth model.