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To use a dividend valuation model, a firm must have a constant growth rate, and the...

To use a dividend valuation model, a firm must have a constant growth rate, and the discount rate must exceed the growth rate. true false

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Answer #1

False!

This statement is false because to use a DDM model we don't need to have a constant growth model. There are various types of DDM models, for example based on single period or multiple period.

As we need a constant growth for GGM( Gordon Growth Model) and GGM is a type of DDM.

Required rate can be less than the growth rate for the firm experiencing super normal growth.for a short period or ffor a firn experiencing multiple growth phase and accordingly we have DDM 2 stage model which is known as H-Model and Three stage DDM to model them.

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