CFA Level 1: Supernormal Growth and Dividend Discount Model

Supernormal Growth and Dividend Discount Model

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Question

During years of temporary supernormal growth, where growth exceeds the required rate of return, the analyst must use the ________ version of the dividend discount model to value a stock.

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During years of temporary supernormal growth, where growth exceeds the required rate of return, the analyst must use the finite version of the dividend discount model to value a stock. This is also known as the variable growth version of the dividend discount model.