Which of the following increases the price an investor is willing to pay for a stock?
A) The investor increases his estimate of the constant growth rate for dividends.
B) The investor decreases his estimate of the constant growth rate for dividends.
C) The investor increases his estimate of the required rate of return.
D) The investor assumes a higher beta for the stock.

Question

Quizplus · Accepted Answer

An increase in the estimated constant growth rate for dividends suggests higher future cash flows, making the stock more valuable to the investor, thus increasing the price they are willing to pay.

Which of the Following Increases the Price an Investor Is