The statement about the Valuation Principle is correct.
The Valuation Principle states that the value of a stock is equal to the present value (PV) of both the dividends and future sale price of that stock which the investor will receive.
So the answer is:
True
The key ideas of the Valuation Principle are:
1. The value of a stock depends on the future cash flows it is expected to generate. This includes dividends and the proceeds from selling the stock.
2. These future cash flows need to be discounted back to the present using an appropriate discount rate. This gives the present value of the future cash flows.
3. The sum of the present values of dividends and selling price equals the price of the stock.
Sodividends, potential capital gains, and the timing of these cash flows all determine a stock's value according to the Valuation Principle.
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