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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Dividend growth model – assumptions
Hey John,
Could you please explain why ” investors make rational decisions” is an assumption of DGM?
Thank you!
The dividend growth model assumes that the market value determined by the shareholders is based on sensible expectations as to the future dividends. In practice lots of other factors may affect the price they are prepared to pay for shares.
Okay got it. Thank you !!
You are welcome.
