Which of the following statements will always hold true?
1 answer:
Answer:
<h2>The constant growth valuation formula is not appropriate to use unless the company’s growth rate is expected to remain constant in the future.</h2>Step-by-step explanation:
The value of a stock can be calculated with the <em>constant growth valuation formula</em>, but it's mandatory that the stock has to have a constant growth, because it depends on this rate. Actually, the present value of a stock is calculated with this formula <em>when it can be assumed that its growth is constant.</em>
On the other hand, if the stock value is zero, if it has no growth at all, then, this formula can't be applied, because this variable will be missing.
If you see the image attached, you're gonna look for <em>'g'</em>, which represents the growth rate.
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