The required rate of return estimated by the Capital Asset Pricing Model is not suitable for use in dividend valuation models

1. The required rate of return estimated by the Capital Asset Pricing Model is not suitable for use in dividend valuation models.

FALSE

2. The approach to stock valuation which holds that the value of a share of stock is a function of its future dividends is known as the dividend valuation model (DVM).

TRUE

3. If the annual dividend on a stock never changes, its price will never change.

FALSE

4. The dividend valuation model (DVM) is very sensitive to the growth rate (g) being used, because it affects both the model's numerator and its denominator.

TRUE

5. The dividend valuation model estimates the value of a share of stock as the future value of all dividends.

FALSE

6. One advantage of the dividend valuation model is that it does not need a required rate of return.

FALSE

7. One of the easiest aspects of the dividend valuation model (DVM) is specifying the appropriate growth rate for a firm's dividends over time.

FALSE

8. The intrinsic value of a zero-growth stock is simply the capitalized value of its annual dividends.

TRUE

9. One method of estimating the dividend growth rate is to calculate the discount rate that equates today's dividend with the dividend paid 5 years ago.

TRUE

10. The rate of dividend growth can be estimated by multiplying the return on equity rate by the dividend payout ratio.

FALSE