The model used to value a stock that has a short-term growth rate that varies from its long-term growth rate is called the _____ dividend growth model.

Question

Quizplus · Accepted Answer

The two-stage dividend growth model is the best choice for valuing a stock that has a short-term growth rate that varies from its long-term growth rate because it assumes two different growth rates: a high growth rate for a certain period of time, followed by a lower long-term growth rate. This model is more realistic than the constant growth model, which assumes that the growth rate remains constant forever.

The Model Used to Value a Stock That Has a Short-Term