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Foundations of Financial Management Study Set 5
Quiz 10: Valuation and Rates of Return
The Constant Growth Valuation Formula Is Ps1u1b1os1u1b0 = Ds1u1b11s1u1b0/g -
Question 83
True False
The constant growth valuation formula is P
o
= D
1
/g - K
e
.
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Q 84
To use a dividend valuation model, a firm must have a constant growth rate and the discount rate must not exceed the growth rate.
Q 85
The drawback of the future share value procedure is that it does not consider dividend income.
Q 86
Future share value is equal to P
o
= D
1
/K
e
- g, assuming constant growth in dividends.
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