The constant growth valuation model—the Gordon model—is based on the premise that the value of a share of common stock is
A. the sum of the dividends and expected capital appreciation.
B. determined based on an industry standard P/E multiple.
C. determined by using a measure of relative risk called beta.
D. equal to the present value of all expected future dividends.
Answer:D
The constant growth valuation model—the Gordon model—is based on the premise that the value of a share of common stock is
A. the sum of the dividends and expected capital appreciation. B. determined based on an industry standard P/E multiple. C. determined by using a measure of relative risk called beta. D. equal to the present value of all expected future dividends.