Which of the following statements is CORRECT?
A) The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
B) Two firms with the same expected dividend and growth rates must also have the same stock price.
C) It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
D) If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
E) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.

Question

Quizplus · Accepted Answer

The Answer of Which of the following statements is CORRECT?
A) The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
B) Two firms with the same expected dividend and growth rates must also have the same stock price.
C) It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
D) If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
E) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.

Which of the Following Statements Is CORRECT