alleryStart learning →When is a two-stage dividend discount model usually used?
AWhen a firm never pays any dividend
BWhen valuing a bond with coupons
CWhen early growth exceeds cost of equity
DWhen growth is exactly zero forever
Answer & Solution
Correct answer: C. When early growth exceeds cost of equity
Constant growth needs g below r, so a high short-run growth phase is modelled separately before a lower stable rate.
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