which of the following is not a problem with using a dividend-based valuation formula course hero

What is not a problem with the dividend discount model?

The model does not consider that dividends may not be paid d. The model does not account for small dividends. The statement is incorrect - infinite growth is not a problem with the dividend discount model because at reasonably high discount rates, such as 12 percent, dividends received in the distant future are worth very little today

What is the relationship between dividends and the firm's value?

a. b. d. a. Dividends are a necessary payment in order for a firm to have value. b. Dividends are paid in cash, and cash serves as a measurable common denominator for comparing the future benefits of alternative investment opportunities. Dividends are the most reliable measure of value because most companies payout dividends to shareholders. d.

Why are dividends the most reliable measure of value?

Dividends are paid in cash, and cash serves as a measurable common denominator for comparing the future benefits of alternative investment opportunities. Dividends are the most reliable measure of value because most companies payout dividends to shareholders. d. Dividend payout ratios are set based on profitability. b.

How are dividend payout ratios set based on profitability?

Dividend payout ratios are set based on profitability. b. Dividends are paid in cash, and cash serves as a measurable common denominator for comparing the future benefits of alternative investment opportunities. When deriving the equity value of a firm, an analyst forecasts the real dividends expected to be paid in the future.

What is dividend paid in?

Dividends are paid in cash, and cash serves as a measurable common denominator for comparing the future benefits of alternative investment opportunities. When deriving the equity value of a firm, an analyst forecasts the real dividends expected to be paid in the future.

Why is debt less risky than equity?

debt is typically less risky because fixed claims bear less residual risk than equity claims . All of the following are steps in the analysis and valuation framework used to understand the fundamentals of a business and determine estimates of its value except: a. Analyze the firm's strategy in terms of the competition.

Do unexpected changes in earnings, dividends, and cash flows correlate closely?

unexpected changes in earnings, dividends, and cash flows do not correlate closely. with changes in stock prices. The historical discount rate of the firm may be a good indicator of the appropriate discount. rate to apply to the firm in the future, when all of the following conditions hold true except: a.