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For the Zero Growth Model

Question 8

Multiple Choice

For the zero growth model:

A) because the valuation formula reduces to the equation for the present value of a perpetuity the process is essentially the same for valuing preferred stock.
B) because the valuation formula reduces to the equation for the future value of a perpetuity the process is essentially the same for valuing preferred stock
C) because the valuation formula reduces to the equation for the present value of an ordinary annuity, the process is essentially the same for valuing preferred stock.
D) because the valuation formula reduces to the equation for the future value of an ordinary annuity, the process is essentially the same for valuing preferred stock.

Correct Answer: