According to the dividend discount model, the current value of a stock is equal to the:
A)present value of all expected future dividends.
B)sum of all future expected dividends.
C)next expected dividend, discounted to the present.
D)discounted value of all dividends growing at a constant rate.

Question

Quizplus · Accepted Answer

The dividend discount model values a stock based on the present value of all expected future dividends. It assumes that the value of a stock is derived from the income it generates through the payment of dividends, and the future growth potential of those dividends. Therefore, A is the correct answer.

According to the Dividend Discount Model, the Current Value of a Stock