The correct answer is: C. 1, 2 and 4
The Walter’s dividend model is a model that calculates the value of a stock based on the assumption that the company will pay a constant dividend forever. The model assumes that the company has a very long or perpetual life, that all earnings are either reinvested internally or distributed as dividends, and that the cost of capital of the company is constant.
Option 1 is correct because the Walter’s dividend model assumes that the company has a very long or perpetual life. This means that the company will continue to exist and pay dividends forever.
Option 2 is correct because the Walter’s dividend model assumes that all earnings are either reinvested internally or distributed as dividends. This means that the company will not use any of its earnings to pay down debt or repurchase shares.
Option 3 is incorrect because the Walter’s dividend model does not assume that there is no floatation cost for the company. Floatation cost is the cost of issuing new shares of stock. The Walter’s dividend model does not take into account the cost of issuing new shares because it assumes that the company will not issue new shares.
Option 4 is correct because the Walter’s dividend model assumes that the cost of capital of the company is constant. This means that the company’s cost of borrowing money will not change over time.
The Walter’s dividend model is a simple and easy-to-use model that can be used to estimate the value of a stock. However, it is important to note that the model makes a number of assumptions, and the results of the model should be interpreted with caution.