In a valuation of a non-constant dividend growth stock, the terminal value represents the:
A)point at which the present value of future dividends equals zero.
B)maturity date of the stock.
C)present value of future dividends from that point onwards.
D)highest value that the stock will attain.

Question

Quizplus · Accepted Answer

The terminal value in a valuation of a non-constant dividend growth stock is the present value of future dividends from a point in time (usually the end of the forecast period) onwards, assuming a constant growth rate. It is not the point at which the present value of future dividends equals zero (A), the maturity date of the stock (B), or the highest value the stock will attain (D).

In a Valuation of a Non-Constant Dividend Growth Stock, the Terminal