If the model below is to give a "reasonable" valuation of a stock,which of the following is not a valid assumption for the model? A) Growth,g,is negative. B) There will be no growth,i.e. ,g is zero. C) The growth rate exceeds the required rate of return. D) The required return is exceptionally high (r_s 30%). E) All of the above are workable assumptions and are valid in the sense that the model can be used even if they hold true.

Question

If the model below is to give a "reasonable" valuation of a stock,which of the following is not a valid assumption for the model? A) Growth,g,is negative. B) There will be no growth,i.e. ,g is zero. C) The growth rate exceeds the required rate of return. D) The required return is exceptionally high (r_s > 30%). E) All of the above are workable assumptions and are valid in the sense that the model can be used even if they hold true.

Quizplus · Accepted Answer

The Answer is C

If the Model Below Is to Give a "Reasonable" Valuation