In the Gordon Growth Model,the growth rate is assumed to be ________ the required return on equity.
A)greater than
B)equal to
C)less than
D)proportional to

Question

Quizplus · Accepted Answer

In the Gordon Growth Model, the growth rate is assumed to be less than the required return on equity. This is because if the growth rate were equal to or greater than the required return on equity, the value of the company would be infinite, which is not possible. Therefore, the model assumes that the growth rate is lower than the required return on equity.

In the Gordon Growth Model,the Growth Rate Is Assumed to Be