A decrease in which of the following will increase the current value of a stock according to the dividend growth model?
A) Dividend amount
B) Number of future dividends, provided the total number of dividends is less than infinite
C) Dividend growth rate
D) Discount rate
E) Both the discount rate and the dividend growth rate

Question

Quizplus · Accepted Answer

The dividend growth model (also known as the Gordon Growth Model) calculates the intrinsic value of a stock based on the dividend per share, the growth rate of these dividends, and the required rate of return or discount rate. According to this model, a decrease in the discount rate increases the present value of future dividends, thus increasing the stock's current value.

A Decrease in Which of the Following Will Increase the Current