Using the constant growth dividend model with all else remaining equal, which of the following will not lead to an increase in the value of common shares?

Question

Quizplus · Accepted Answer

The constant growth dividend model (also known as the Gordon Growth Model) calculates the value of a stock by dividing the next year's dividends by the difference between the required rate of return and the dividend growth rate. An increase in the required rate of return (choice C) would increase the denominator in this formula, leading to a decrease in the calculated stock value, not an increase.

Using the Constant Growth Dividend Model with All Else Remaining