alleryStart learning →A company pays a constant dividend forever with no growth. Which expression gives its share price?
AD1 times (1 + r)
BD1 less the rate r
CD1 divided by rate r
DD1 multiplied by r
Answer & Solution
Correct answer: C. D1 divided by rate r
With g equal to zero the Gordon formula D1 / (r - g) reduces to a perpetuity, D1 divided by r.
Keep practising Dividend Discount Model
Browse all Dividend Discount Model questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
What equity premium did a standard calibrated general equilibrium model predict?Who named the equity premium puzzle in their 1985 study?The equity premium puzzle starts from an observed US premium of roughly what size?How is the equity risk premium defined?As a firm's risk rises, what happens to its cost of capital?Bond yield plus risk premium adds a premium to which rate?A firm's combined cost of debt and equity capital is calculated as what?Why is a firm's cost of equity harder to find than its cost of debt?