Asked by Kayla Harrington on May 22, 2024
Verified
The dividend discount model
A) ignores capital gains.
B) incorporates the after-tax value of capital gains.
C) includes capital gains implicitly.
D) restricts capital gains to a minimum.
E) None of the options are correct.
Dividend Discount Model
A valuation method used to estimate the value of a stock by discounting predicted dividends to their present value.
Capital Gains
The profit from the sale of an asset or investment when the sale price exceeds the purchase price.
After-tax Value
The value of an investment or income after all taxes have been deducted, reflecting the net gain or loss.
- Acquire knowledge of the constituents and functionalities of the Dividend Discount Model (DDM).
Verified Answer
BP
Brandie Pyburn-SmithMay 24, 2024
Final Answer :
C
Explanation :
The dividend discount model (DDM) includes capital gains implicitly by assuming that the price of the stock will grow at a constant rate, which leads to capital gains for the investor when the stock is sold.
Learning Objectives
- Acquire knowledge of the constituents and functionalities of the Dividend Discount Model (DDM).
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