[amp_mcq option1=”Ezra Solomon” option2=”Myron J. Gordon” option3=”James E. Walter” option4=”Merton H. Miller and Franco Modigliani” correct=”option2″]<\/p>\n
The correct answer is B. Myron J. Gordon.<\/p>\n
The dividend capitalization model is a method of valuation that uses the present value of future dividends to estimate the value of a stock. The model was developed by Myron J. Gordon in 1959.<\/p>\n
The model assumes that a stock’s price is equal to the present value of its future dividends, discounted at a rate that reflects the risk of the stock. The model can be written as follows:<\/p>\n
P = D1\/(r – g)<\/p>\n
where:<\/p>\n
P = the price of the stock<\/p>\n
D1 = the dividend per share expected in the next year<\/p>\n
r = the discount rate<\/p>\n
g = the expected growth rate of dividends<\/p>\n
The dividend capitalization model is a simple and straightforward method of valuation. However, it has some limitations. One limitation is that it assumes that dividends will grow at a constant rate. This may not be realistic, as dividends can fluctuate over time. Another limitation is that the model does not take into account other factors that can affect a stock’s price, such as changes in earnings or interest rates.<\/p>\n
Despite its limitations, the dividend capitalization model can be a useful tool for estimating the value of a stock. It is important to remember, however, that the model should only be used as one part of a comprehensive valuation analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Ezra Solomon” option2=”Myron J. Gordon” option3=”James E. Walter” option4=”Merton H. Miller and Franco Modigliani” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[700],"tags":[],"class_list":["post-33727","post","type-post","status-publish","format-standard","hentry","category-business-finance","no-featured-image-padding"],"yoast_head":"\n