According to the dividend growth model, if a company were to declare that it would never pay dividends, its value would be
A) based on earnings.
B) based on expectations regarding.
C) higher than similar firms because it could reinvest a greater amount in new projects.
D) zero.
E) based on the capital asset pricing model.

Question

Quizplus · Accepted Answer

According to the dividend growth model, the value of a company is based on the present value of its future dividends. If a company declares it will never pay dividends, then, according to this model, its value would be zero because the model relies entirely on dividends to determine value.

According to the Dividend Growth Model, If a Company Were