Applications of the DDM Model

CFA Level I Equities
#1

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)?

#2

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

#3

Buzzkill!