Which one of the following models can be used to value the stock of a non-dividend paying firm?

Question

Quizplus · Accepted Answer

The residual income model can be used to value the stock of a non-dividend paying firm, as it focuses on the company's net income that is above what investors expect to earn on the equity. This excess income, or residual income, is used to value the company's stock. The other models listed (two-stage growth, dividend growth, supernormal growth, perpetual dividend growth) all rely on the company paying dividends, which is not the case for a non-dividend paying firm.

Which One of the Following Models Can Be Used to Value