Common stocks that experience dividend growth than is consistently higher than their required rates of return
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A. B. C. D.B
The infinite period Dividend Discount Model postulates that the current value of a common stock is equal to D1 / (k - g), where D1 is next period's dividend, k is the required rate of return, and g is the growth rate of dividends. If the growth rate of dividends exceeds the required rate of return, the value of the stock is shown to be negative, which is impossible. The infinite period Dividend Discount Model cannot be used to value such stocks.