Which of the following statements concerning the constant-growth dividend valuation model is (are) correct?
I. One simple method of estimating the dividend growth rate is to analyze the historical pattern of dividends.
II. The expected total return equals the return from capital gains plus the return from dividends paid.
III. The model is applicable to growth firms with initially high growth rates.
IV. The intrinsic value calculated using this method can change from one investor to another if their risk assessments, and therefore their required returns, differ.
A) I and IV only
B) II and III only
C) I, II and IV only
D) I, II and III only

Question

Quizplus · Accepted Answer

I. Analyzing the historical pattern of dividends is a common method for estimating future dividend growth rates.II. The expected total return from an investment indeed comprises both the return from capital gains and the return from dividends.IV. Different investors may require different rates of return based on their individual risk assessments, which can lead to variations in the calculated intrinsic value of a stock.

Which of the Following Statements Concerning the Constant-Growth Dividend Valuation