The constant dividend growth model is:
A) generally used in practice because most stocks have a constant growth rate.
B) generally used in practice because the historical growth rate of most stocks is constant.
C) generally not used in practice because most stocks grow at a non constant rate.
D) generally not used in practice because the constant growth rate is usually higher than the required rate of return.
E) based on the assumption Dow 30 represents a good estimate of the market index.

Question

Quizplus · Accepted Answer

The constant dividend growth model assumes that the growth rate of dividends is constant, which is generally not the case for most stocks in practice. As a result, this model is not widely used.

The Constant Dividend Growth Model Is