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The Gordon Dividend Discount Model Has a Number of Problems

Question 18

Multiple Choice

The Gordon dividend discount model has a number of problems which include:


A) the required rate of return must be greater than the expected growth rate. If this is not the case, then the model will estimate a negative value for the share price (which is impossible) .
B) if the expected growth rate is really greater than the required rate of return, then the Gordon growth model is not appropriate for valuation.
C) this model assumes that the fundamentals of the firm will remain constant over time.
D) all of the above.

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