If the growth rate of dividends increases and the required rate of return stays the same, the stock price will
A) the effect of such a change depends on other factors.
B) decline.
C) rise.
D) stay the same.

Question

Quizplus · Accepted Answer

When the growth rate of dividends increases while the required rate of return remains constant, the stock price will rise. This is because the value of a stock is determined by the present value of its future dividends. If the growth rate of these dividends increases, the future dividends are expected to be higher, which increases the stock's present value or price.

If the Growth Rate of Dividends Increases and the Required