If you want to value a firm that consistently pays out its earnings as dividends,the simplest model for you to use is the:
A)enterprise value model.
B)total payout model.
C)dividend discount model.
D)discounted free cash flow model.

Question

Quizplus · Accepted Answer

The dividend discount model (DDM) is specifically designed to value a company that consistently pays out its earnings as dividends. This model calculates the present value of all future dividends, discounted back to their current value. It takes into account the company's current dividend payments, the growth rate of those dividends, and the required rate of return. While all of the models listed may be applicable under different circumstances, the DDM would be the most appropriate for this specific scenario.

If You Want to Value a Firm That Consistently Pays