How is it possible to ignore cash dividends that occur far into the future when using a dividend discount model? Those dividends:
A)Will be paid to a different investor
B)Will not be paid by the firm
C)Have an insignificant present value
D)Ignore the tax consequences of future dividends

Question

Quizplus · Accepted Answer

The dividend discount model relies on calculating the present value of future cash flows, including dividends. However, as the time horizon for future dividends extends far into the future, the present value becomes insignificant due to the time value of money. Therefore, it is reasonable to ignore cash dividends that occur far into the future when using a dividend discount model.

How Is It Possible to Ignore Cash Dividends That Occur