The dividend growth model states that the market price of a stock is only affected by the amount...

Question:

The dividend growth model states that the market price of a stock is only affected by the amount of the dividend.

True

False

Dividend:

The amount paid by the organization to its shareholders against their investment is known as a dividend. It is a part of the entire profit earned by the organization in a particular period. The board of directors decides the amount of dividend.

Answer and Explanation:

This statement is false.

The dividend growth model determines the fair value price of a share or unit of equity. This model takes the distribution amount of dividend per share, the estimated growth rate of the dividend and the required rate of return under consideration.


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The Dividend Growth Model

from Finance 101: Principles of Finance

Chapter 14 / Lesson 3
10K

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