For which one of the following situations will the dividend valuation models be least reliable?
A) mature firm with a policy of increasing its earnings and dividends at an average rate of 5% per year
B) a young firm that does not pay dividends and is unlikely to begin doing so in the near future
C) a preferred stock with a a constant dividend
D) a company that is widely viewed as an attractive takeover target

Question

Quizplus · Accepted Answer

Dividend valuation models are least reliable for firms that do not pay dividends, as these models require dividend payments to calculate the value of the firm. A young firm that does not pay dividends and is unlikely to do so in the near future cannot be effectively valued using dividend valuation models.

For Which One of the Following Situations Will the Dividend