CFA Practice Question

CFA Practice Question

In the Discounted Dividends Model (DDM) with constant rate of growth (growing perpetuity) for dividends the price of a stock is higher if:
A. first period Dividends is lower and the Constant Growth Rate is higher.
B. first period Dividends is lower and the Constant Growth Rate is lower.
C. first period Dividends is higher and the Constant Growth Rate is higher.
Explanation: Higher dividends and higher growth rate both mean higher future cash flows.

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