CFA Practice Question

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CFA Practice Question

The constant-growth dividend discount model will not produce a finite value if the dividend growth rate is ______.

A. above its historical average
B. above its market capitalization rate
C. below its historical average
Correct Answer: B

User Contributed Comments 7

User Comment
cgeek k-g < 0 ?
katybo above required rate
haarlemmer Just checked the definition, market cap rate= RRR
Indira in DDM g should always be lower than the required rate of return or market cap rate
Khadria A. Historical Average = g (so it can't be correct)
cong market capitalization is the same as the required return on equity. k-g needs to be positive.
robbiecow Wiki: "Capitalization rate (or "cap rate") is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value."
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