- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 3. Equity Instruments and the Time Value of Money
CFA Practice Question
A no-growth dividend discount model is ______.
A. value = price earnings ratio
B. value = market value of firm / book value of firm on replacement cost basis
C. equity = dividends / rate of return
User Contributed Comments 8
| User | Comment |
|---|---|
| sbajaj | what is the explanation for this answer choice?? |
| virashe | in case of no growth dividend, it becomes a perpetuity. The value of a perpetuity is simply 1 / K. In this case it will be D / k. |
| ehc0791 | is equity the same as value ? |
| Tomas | Equity is the value of a company. (assets=liabilities+equity). In case of a stock equity = its value. |
| kamil77 | If Equity = dividends / rate of return, then rate of return = dividends / Equity, which is exactly the case as no portion of dividends is retained |
| johnj | ref virashe, u say perpetuity is 1/k, but with no dividends, it would be 0/k |
| CFAwriter | no-growth dividend means dividend remains constant, but not 0. |
| Inaganti6 | WONDERFUL QUESTION REALLY |