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The dividend discount model is still useful even when the company pays no dividends. For example, Amazon has never paid a dividend, but we can anticipate that Amazon will eventually pay a considerable level of dividends in the future. Suppose that Amazon will pay its first dividend of $201 per share in 10 years.

Does this invalidate the divident discount model?

Respuesta :

TomShelby

Answer:

NO It doesn't.

Explanation:

As the price will discount the expected 201 dollar of dividens for rate of return in ten years along with future expected dividends

[tex]\frac{201}{(1+r)^{10}} = PV[/tex]

This present value will be the value of amazon share price or it will be added to the present value of other expected dividends.

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