The rate of growth can exceed the required return during the variable-growth period without invalidating the variable growth dividend valuation model.

Question

Quizplus · Accepted Answer

During the variable-growth period, the rate of growth can indeed exceed the required return temporarily, as this period reflects a phase of rapid expansion or high growth that a company might experience. The variable growth dividend valuation model accommodates such scenarios, understanding that growth rates will eventually stabilize to levels at or below the required return in the long-term phase.

The Rate of Growth Can Exceed the Required Return During