The zero-growth dividend model:
A) provides higher values for common stocks than a positive constant growth.
B) is the most accurate model to use.
C) is equivalent to the valuation model for preferred stocks and perpetual bonds.
D) assumes the highest required return possible.

Question

Quizplus · Accepted Answer

The zero-growth dividend model is equivalent to the valuation model for preferred stocks and perpetual bonds because it assumes dividends remain constant over time, similar to the fixed payments from preferred stocks and perpetual bonds.

The Zero-Growth Dividend Model