What is the model called that determines the market value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?
A) Maximal-growth model
B) Constant-growth model
C) Capital pricing model
D) Realized-earnings model
E) Realized-growth model

Question

Quizplus · Accepted Answer

The model described is the constant-growth model, which calculates the present value of a stock based on the expectation of a constant annual dividend growth rate. The model takes into account the next annual dividend, the dividend growth rate, and the applicable discount rate to determine the stock's market value.

What Is the Model Called That Determines the Market Value