stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00.The dividend is expected to decline at a rate of 5% a year forever If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?
A)The company's current stock price is $20.
B)The company's dividend yield 5 years from now is expected to be 10%.
C)The constant growth model cannot be used because the growth rate is negative.
D)The company's expected capital gains yield is 5%.
E)The company's expected stock price at the beginning of next year is $9.50.

Question

Quizplus · Accepted Answer

The Answer of stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00.The dividend is expected to decline at a rate of 5% a year forever If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?
A)The company's current stock price is $20.
B)The company's dividend yield 5 years from now is expected to be 10%.
C)The constant growth model cannot be used because the growth rate is negative.
D)The company's expected capital gains yield is 5%.
E)The company's expected stock price at the beginning of next year is $9.50.

Stock Is Expected to Pay a Year-End Dividend of $2