Question: 1. A major difference between the dividend discount model (DDM) and the free cash flow to equity model (FCFE) is that the FCFE : accounts

1. A major difference between the dividend discount model (DDM) and the free cash flow to equity model (FCFE) is that the FCFE :

accounts for potential capital gains and the DDM does not

measures what a firm could pay out in dividends and the DDM measures what is actually paid

measures both dividend growth and stability and the DDM only measures the dividend growth

bases its calculations on future value techniques while the DDM uses present value calculations

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