Dividend models suggest that the value of a financial asset is determined by the ________ the owner is entitled to while holding the asset.
A)present cash flows
B)past cash flows
C)future cash flows
D)past and present cash flows

Question

Quizplus · Accepted Answer

Dividend models, such as the dividend discount model, are based on the premise that the value of a financial asset is determined by the future cash flows that the owner is entitled to while holding the asset. In other words, the model assumes that investors value assets based on the income they expect to receive in the future, rather than the income they have received in the past or the income they currently receive. Therefore, future cash flows are the most important factor in determining the value of a financial asset according to dividend models.

Dividend Models Suggest That the Value of a Financial Asset