The dividend models appeal to a fundamental concept of asset pricing-that the value of an asset is determined by the future cash flow to which the owner is entitled while holding the asset,and the required rate of return for the cash flow.

Question

Quizplus · Accepted Answer

This statement is true. The dividend models, such as the dividend discount model, calculate the present value of future cash flows in the form of dividends to determine the value of a stock. This approach is based on the idea that the value of an asset is determined by its expected future cash flows and the discount rate used to calculate the present value of those cash flows.

The Dividend Models Appeal to a Fundamental Concept of Asset