3. which of the following statements is NOT CORRECT? a. Discounted dividend mode

Question

3. which of the following statements is NOT CORRECT? a. Discounted dividend model is often used to valuate mature, dividend-paying firms. b. Discounted dividend model cannot be used to valuate firms that have just started paying dividends, because there is no dividend history for us to estimate the growth rate of dividends The price multiple method can be used to valuate a company if publicly traded comparable companies exist. c. d. If a company is shrinking, then its share price is expected to decline, yet it still could provide a positive return to shareholders.

Explanation / Answer

3.

Ususally discounted dividend model is used for mature firm that use to pay regular dividend. any firm that pays dividend and expected to pay regular dividend is future can use discounted dividend model to value stock price.

A firm that start paying paying dividend can use discounted dividend model model to evaluate stock.

Option (B) is correct answer.

4.

Common stock represent ownership of a firm and always gives its shareholder voting right. Stock compensation is paid only to higher authorities, like, CEO, CFO, President. managers are not compensated with stock.

So, option (B) is not correct regarding stock.

Option (B) is correct answer.

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