{"id":34675,"date":"2024-04-15T09:34:08","date_gmt":"2024-04-15T09:34:08","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=34675"},"modified":"2024-04-15T09:34:08","modified_gmt":"2024-04-15T09:34:08","slug":"which-combination-of-the-following-represents-the-assumptions-of-the-walters-dividend-model-i-the-company-has-a-very-long-or-perpetual-life-ii-all-earnings-are-either-reinvested-internally-or-di","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-combination-of-the-following-represents-the-assumptions-of-the-walters-dividend-model-i-the-company-has-a-very-long-or-perpetual-life-ii-all-earnings-are-either-reinvested-internally-or-di\/","title":{"rendered":"Which combination of the following represents the assumptions of the Walter&#8217;s dividend model? I. The company has a very long or perpetual life. II. All earnings are either reinvested internally or distributed as dividend. III. There is no floatation cost for the company. IV. Cost of capital of the company is constant."},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a9ed964a9820\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    I, II, III                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    II, III, IV                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"true\">\r\n                    I, II, IV                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    I, III, IV                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is C. I, II, IV.<\/p>\n<p>The Walter&#8217;s dividend model is a model that is used to estimate the value of a stock. It assumes that the company has a very long or perpetual life, all earnings are either reinvested internally or distributed as dividend, and the cost of capital of the company is constant.<\/p>\n<p>The first assumption, that the company has a very long or perpetual life, is necessary because the model assumes that the company will continue to pay dividends forever. This assumption is not always realistic, but it is a necessary simplification in order to make the model tractable.<\/p>\n<p>The second assumption, that all earnings are either reinvested internally or distributed as dividend, is also necessary for the model to work. If the company were to spend some of its earnings on things other than dividends or reinvestment, then the model would not be able to accurately predict the future value of the stock.<\/p>\n<p>The third assumption, that there is no floatation cost for the company, is not as important as the first two assumptions. However, it is still a simplification that makes the model easier to use.<\/p>\n<p>The fourth assumption, <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n         <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div>        <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> that the cost of capital of the company is constant, is also not as important as the first two assumptions. However, it is still a simplification that makes the model easier to use.<\/p>\n<p>In conclusion, the correct answer is C. I, II, IV.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[704],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Which combination of the following represents the assumptions of the Walter&#039;s dividend model? I. The company has a very long or perpetual life. II. All earnings are either reinvested internally or distributed as dividend. III. There is no floatation cost for the company. IV. 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