alleryStart learning →The price from the Gordon model is highly sensitive to which input?
AStock exchange listed
BShare face value
CGrowth rate assumed
DNumber of employees
Answer & Solution
Correct answer: C. Growth rate assumed
A small change in g changes the gap r minus g sharply, so the computed price moves a lot.
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?