Series XVHardFundamental Analysis

The Dividend Discount Model (DDM) values an equity share as the:

ASum of all past dividends paid by the company
BLatest dividend multiplied by the P/E ratio
CBook value of equity per share
DPresent value of the expected future stream of dividendscheck_circle

Correct answer

D. Present value of the expected future stream of dividends

lightbulbDetailed Solution

The DDM holds that a share is worth the present value of the dividends it is expected to pay in the future, discounted at the investor's required rate of return. The simplest form, the Gordon growth model, assumes dividends grow at a constant rate: value = D₁ ÷ (r − g).

Reference: NISM Series XV Research Analyst, Chapter 3.

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