The Gordon model
A)is a generalization of the perpetuity formula to cover the case of a growing perpetuity.
B)is valid only when g is less than k.
C)is valid only when k is less than g.
D)A and B.
E)A and C.

Question

Quizplus · Accepted Answer

The Gordon model, also known as the Gordon Growth Model, is a version of the perpetuity formula that accounts for a constant growth rate in dividends (A). It is valid only when the growth rate (g) is less than the required rate of return (k) (B).

The Gordon Model