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Basic Question 0 of 20
Company X is expected to pay a $5 dividend next year (year 1). The dividend will decline by 5% annually for the following three years. In Year 5, the company is expected to merge with another company which will be in its growth phase. The Year 5 after-merger dividend is expected to be $6. In Year 6 the dividend is expected to be at $5. It is then expected to growth by 4% annually thereafter. Which of the following matches DDM most appropriate to value company X?
B. H model.
C. Spreadsheet modeling.
A. Three-stage DDM.
B. H model.
C. Spreadsheet modeling.
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Your review questions and global ranking system were so helpful.
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Learning Outcome Statements
estimate a required return based on any DDM, including the Gordon growth model and the H-model;
CFA® 2025 Level II Curriculum, Volume 3, Module 21.