contestada

The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities.A. TrueB. False

Respuesta :

jepessoa

Answer:

True

Explanation:

The perpetuity formula used to determine the value of stock is:

stock value = dividend        

                      interest rate

The discounted cash flow formula used to determine the value of a project or a revenue generating asset is:

present value = cash flow        

                          discount rate

The cash flow is equivalent to the dividend, and the discount rate is equivalent to the interest rate.