The constant perpetual growth model is applicable primarily to those firms who

Question

Quizplus · Accepted Answer

The constant perpetual growth model assumes that the firm's earnings and dividends will grow at a constant rate indefinitely. This is most applicable to firms that have relatively stable earnings and expect to increase their annual dividend for several years. Therefore, option B is the best choice. Option A suggests that firms are fast growing, which may not be sustainable in the long-term, while option C suggests a short-term focus on dividend growth. Option D suggests very slow growth, which may not be ideal for applying the constant perpetual growth model. Option E suggests a long history of constant dividends, but not necessarily a consistent growth rate.

The Constant Perpetual Growth Model Is Applicable Primarily to Those