Using the Gordon growth model,a stock's current price will increase if
A)the dividend growth rate increases.
B)the growth rate of dividends falls.
C)the required rate of return on equity rises.
D)the expected sales price rises.

Question

Quizplus · Accepted Answer

The Gordon growth model, also known as the Dividend Discount Model (DDM), calculates the intrinsic value of a stock based on a future series of dividends that grow at a constant rate. According to this model, the stock's current price will increase if the dividend growth rate increases, because future dividends are expected to be higher, making the stock more valuable today.

Using the Gordon Growth Model,a Stock's Current Price Will Increase