Why would we want to assume a constant growth to dividends if we seldom see a firm with this type of pattern?
A)The answer is that we really want to estimate a series of future dividends and can only do this if we have a growth rate.
B)The answer is that we do not need to estimate future capital gains and can only do this if we have a growth rate.
C)The answer is that we really want to estimate a series of past dividends and can only do this if we have a growth rate.
D)The answer is that we really want to estimate the past capital gains and can only do this if we have a growth rate.

Question

Quizplus · Accepted Answer

Assuming a constant growth to dividends is a simplifying assumption to estimate future dividends, even though actual dividend patterns may not follow a constant growth rate. By assuming a growth rate, we can project future dividends and estimate their present value.

Why Would We Want to Assume a Constant Growth to Dividends