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Hi sir, i just wanna check if my understanding is correct on the limitations of dividend growth model .
The model assumes that shareholders value firms based on
-the amount of future dividends that a company pays &
– the rate of growth of dividends right ?Therefore, the value of the firm can become questionable if the company either stops paying or reduces its dividend payment right ?
The market value is based on shareholders expectations of future dividends. If anything happens to change their expectations (such as reducing the dividend) then the share price will change.
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