The constant growth dividend valuation model does not hold when
A)ke is greater than g
B)dividends are growing faster than 4 percent
C)g is greater than ke
D)the current dividend is known

Question

Quizplus · Accepted Answer

The constant growth dividend valuation model assumes that the growth rate (g) is less than the required rate of return (ke). If g is greater than ke, the model does not hold as it would imply an infinite or negative stock price.

The Constant Growth Dividend Valuation Model Does Not Hold When