Free Version
Easy

# Understanding the Formula for the Dividend Growth Model

CORPFN-VRYMKD

The proper formula for the Constant (Gordon) Dividend Growth Model is $P = D / (g - k)$.

Which of the following is the best explanation of the purpose of this formula?

A

This formula provides a forecast based on a varied expectation of growth of dividends to determine its value.

B

This formula provides a forecast based on a constant (unvaried) expectation of growth of dividends to determine its value.

C

This formula provides a forecast based on a constant (unvaried) expectation of growth of original price and dividends to determine its value.

D

This formula provides a forecast based on a constant zero growth expectation of dividends to determine its value.