Which of the following statements is most correct.
A) The stock valuation model, P0 = D1/(rs - g), can be used for firms which have negative growth rates.
B) If a stock has a required rate of return rs = 12 percent, and its dividend grows at a constant rate of 5 percent, this implies that the stock's dividend yield is 5 percent.
C) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
D) Statements a and c are correct.
E) All of the statements above are correct.

Question

Quizplus · Accepted Answer

The stock valuation model, P0 = D1/(rs - g), can be used for firms with negative growth rates as long as the required rate of return (rs) is greater than the growth rate (g).

Which of the Following Statements Is Most Correct