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Answer: only the long-term dividend growth rate.
In a general two-stage DDM, the terminal value represents the value of all dividends beyond the initial high-growth period. This terminal value is calculated using the last dividend paid in the high-growth period and the long-term sustainable growth rate, as the model assumes the company will grow at this perpetual rate indefinitely after the initial high-growth phase.
Author: LeetQuiz Editorial Team
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When using a general two-stage DDM, the terminal value of the stock can be estimated using the last dividend paid and:
A
only the short-term dividend growth rate.
B
only the long-term dividend growth rate.
C
both the short-term dividend growth rate and the long-term dividend growth rate.
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