The dividend discount model values a stock based on:

A Book value

B The present value of all expected future dividend payments

C Revenue growth only

D Market capitalization

✓ Correct Answer: Option B

DDM: Stock Price = D1 / (r - g) (Gordon Growth Model for constant growth). Values stock as PV of all future dividends. Requires stable dividend policy and growth rate < required return.

💡 Why is B) the correct answer?

The correct answer to the question "The dividend discount model values a stock based on:" is Option B: The present value of all expected future dividend payments.

The other options — A) Book value, C) Revenue growth only, D) Market capitalization — are incorrect for this Pre-MBA Exam Prep question. As explained above: DDM: Stock Price = D1 / (r - g) (Gordon Growth Model for constant growth). Values stock as PV of all future dividends. Requires stable dividend policy and growth rate < required return.

📚 About This Pre-MBA Exam Prep Practice Question

This 3-level Pre-MBA Exam Prep question from the Finance topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free Pre-MBA Exam Prep practice test or use flashcards for spaced repetition review.

Practice Pre-MBA Exam Prep Quizzes → Browse All Questions Study Flashcards

The dividend discount model values a stock based on:

✓ Correct Answer: Option B

📚 About This Pre-MBA Exam Prep Practice Question

Related Pre-MBA Exam Prep Questions