Answer:
The correct answer is 4. The constant dividend growth model can be used to compute a stock price at any point in time.
Explanation:
The constant dividend growth model is a way of valuing financial assets, usually equities. The model is based on calculating the value of future and expected dividends and profits with interest calculations. Basically, this is very simple, but incorrect assumptions affect the model greatly, as it is sensitive to small changes.
The model is a development of the present value method, by allowing current capital growth to estimate how growth will happen in the future and discounting these minus capital costs to their present value, thereby providing a numerical value that represents the value of the asset. Basically, the model uses three variables, the current share price, the normal capital growth and the cost of the company's capital.
