Why Is the Dividend Valuation Method Based on the Concept

Multiple Choice

Why is the dividend valuation method based on the concept that the present value of the future stream of dividends is an appropriate measure of a business's value?

A) The amount of dividends paid to shareholders is not discretionary and, therefore, is an objective measure of the value of the company to the shareholder.
B) Shareholders purchase shares only for the returns represented by future dividends.
C) Ultimately all value inherent in the company will be distributed as dividends.
D) Companies usually offer a predictable payout of dividends and therefore dividends are the most reliable measure of wealth gained by the shareholder.
E) The only cash returns from holding a business's shares take the form of dividends.