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The Multi-Stage Dividend Discount Model (Multi-Stage DDM) is an advanced version of the Dividend Discount Model (DDM) used to value companies with varying growth phases. Its significance lies in its ability to capture changes in dividend growth rates over time, making it more flexible and realistic than the traditional DDM.
While highly effective, Multi-Stage DDM requires careful estimation of growth rates, timeframes, and discount rates, which can introduce complexity and subjectivity. Despite these challenges, it remains an essential tool for analysts valuing companies with evolving dividend policies.
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