The zero growth dividend valuation model is used when a firm's future dividends are expected to remain constant _______.
A) so the value of the firm should also remain constant
B) so the required rate of return should also remain constant
C) and the firm cannot be valued
D) forever

Question

Quizplus · Accepted Answer

The zero growth dividend valuation model assumes that future dividends will remain constant forever, hence the name "zero growth". This means that the firm's value can be calculated by discounting the expected constant dividends at the required rate of return, which is also assumed to remain constant. Therefore, the correct answer is (D) forever.

The Zero Growth Dividend Valuation Model Is Used When a Firm's