One of the circumstances in which the Gordon growth valuation model for estimating the value of a share of stock should be used is ________.
A) declining dividends
B) an erratic dividend stream
C) the lack of data on dividend payments
D) a steady growth rate in dividends

Question

Quizplus · Accepted Answer

The Gordon growth model is based on the assumption of a steady growth rate in dividends, so it is best used when there is a consistent pattern of dividend growth. If dividends are declining or erratic, the model may not be a suitable tool for valuation. Similarly, if there is a lack of data on dividend payments, the model would not be applicable.

One of the Circumstances in Which the Gordon Growth Valuation