The equity valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash involves:
A)maximum dividends
B)pseudo dividends
C)sustainable growth dividend retention
D)actual dividend payments

Question

Quizplus · Accepted Answer

The equity valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash is known as the pseudo dividend. It assumes that the company will not pay any dividends but instead, will reinvest all earnings back into the business. Surplus cash is also taken into account, which means that the company's true value is determined by its ability to generate cash flows from its operations, rather than the amount of cash it has on hand.

The Equity Valuation Method Involving Zero Explicitly Forecasted Dividends and an Adjustment