Which two terms correctly complete the following statement: "DVM models are based on the premise that the market value of ordinary shares represents the sum of the , discounted to a ."?
A) expected future dividend flows to infinity; present value
B) expected future dividend flows to infinity; future value
C) expected future dividend flows to the planning horizon; present value
D) expected future dividend flows to the planning horizon; future value

Question

Quizplus · Accepted Answer

DVM models assume that the market value of ordinary shares represents the present value of expected future dividend flows to infinity, discounted to a present value. This means that the DVM model assumes that an investor will receive an infinite stream of future dividends and the value of those dividends is discounted back to their present value to determine the stock's current market price.

Which Two Terms Correctly Complete the Following Statement: "DVM Models