Which of these completes this statement to make it true? The constant growth model is
A) always going to have assumptions that will hold true.
B) adjustable for stocks that don't expect constant growth without sizeable errors.
C) only going to be appropriate for the limited number of stocks that just happen to expect constant growth.
D) only going to be appropriate for the limited number of stocks that just happen to expect nonconstant growth.

Question

Quizplus · Accepted Answer

The constant growth model, often associated with the Gordon Growth Model, is specifically designed for valuing stocks that are expected to grow at a constant rate indefinitely. It is most appropriate for stable, mature companies with predictable growth rates, making it only suitable for a limited number of stocks that meet these criteria. Stocks that do not expect constant growth or have variable growth rates may not be accurately valued using this model, highlighting its limitations.

Which of These Completes This Statement to Make It True