The value of a supernormal growth share is the present value of the mixed growth dividends and the present value of the constant-growth dividends.

Question

Quizplus · Accepted Answer

This is correct because a supernormal growth share is a type of share that experiences a high growth rate in the early years but eventually levels off to a constant growth rate. Therefore, the present value of the mixed growth dividends (during the high-growth phase) and the present value of the constant-growth dividends both contribute to the overall value of the share.

The Value of a Supernormal Growth Share Is the Present