88. An investor wants to determine the intrinsic value of the common stock for a company with the
following characteristics:
• The firm maintains a constant dividend payout ratio
• Goodwill and patents account for 40% of the firm’s assets
• The firm’s revenues and earnings are highly correlated with the business cycle
Further, the investor focuses on the firm’s capacity to pay dividends rather than expected
dividends. Considering the above, the investor will most likely use which of the following
valuation models?
A. Asset-based valuation model.
B. Free-cash-flow-to-equity model.
C. Gordon dividend growth model.
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