CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

The constant-growth dividend discount model would typically be most appropriate in valuing the stock of a ______.

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
Correct Answer: C

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.
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 ??
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