Stock valuation model dynamics make clear that higher growth rates lead to
A) lower valuations.
B) higher valuations.
C) lower growth rates continuing.
D) higher growth rates continuing.

Question

Quizplus · Accepted Answer

Higher growth rates typically lead to higher valuations because they imply that the company will generate more future cash flows, which, when discounted back to their present value, increase the overall value of the company.

Stock Valuation Model Dynamics Make Clear That Higher Growth Rates