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Basic Question 4 of 7
A company is in the transition phase. Its growth rate is high but is expected to decline linearly throughout the supernormal growth period until it reaches a normal rate at the end. The ______ is appropriate to value this company.
B. Three-stage DDM.
C. H model.
A. Spreadsheet modeling.
B. Three-stage DDM.
C. H model.
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I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain the assumptions and justify the selection of the two-stage DDM, the H-model, the three-stage DDM, or spreadsheet modeling to value a company's common shares;
describe terminal value and explain alternative approaches to determining the terminal value in a DDM;
calculate and interpret the value of common shares using the two-stage DDM, the H-model, and the three-stage DDM;
explain the use of spreadsheet modeling to forecast dividends and to value common shares;
evaluate whether a stock is overvalued, fairly valued, or undervalued by the market based on a DDM estimate of value.
CFA® 2025 Level II Curriculum, Volume 3, Module 21.