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In a two-stage dividend growth model, it is commonly assumed that dividend growth drops from a...

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Finance

In a two-stage dividend growth model, it is commonly assumedthat dividend growth drops from a high rate in the first stage to alow perpetual growth rate in the second stage. Discuss thereasonableness of this assumption and what happens if thisassumption is violated.

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It is the notional assumption of twostage dividend growth model Twostage dividend growth model works on the assumption that the dividend grows more on first phase than its growth rate decreases to its perpetuity in the second phase It is considered that business is growing in the first phase causing high    See Answer
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