Which one of the following models can be used to value the stock of a firm that maintains a one hundred percent retention ratio?
A)two-stage growth
B)residual income
C)perpetual dividend growth
D)supernormal growth
E)perpetual cash flow

Question

Quizplus · Accepted Answer

The residual income model can be used to value a firm that maintains a one hundred percent retention ratio because it does not rely on dividends being paid out. Instead, it focuses on the income that a company can generate above its cost of capital, which is relevant for companies that reinvest all earnings back into the business.

Which One of the Following Models Can Be Used to Value