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Applications of the DDM Model

Please assume a $1 dividend and a net income range of $(-10) ~ $10.

(1) Can the dividend discount model be used when dividends are constant?

(2) Can the dividend discount model be used when dividends are constant while income varies but stays positive for more than a year (e.g. 2, 3, or 4 years)?

(3) Can the dividend discount model be used when dividends are constant while income varies but is negative for more than a year (e.g. 2, 3, or 4 years)?

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(4) No one uses the DDM in practice. It’s purely an academic exercise. 

Sweep the Leg wrote:
(4) No one uses the DDM in practice. It’s purely an academic exercise.

Buzzkill!

Simplify the complicated side; don't complify the simplicated side.

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