According to the Gordon-Growth model, an increase in the required return on equity

Question

Quizplus · Accepted Answer

According to the Gordon-Growth model, the value of a stock is determined as the present value of future dividends, discounted at the required rate of return. The required rate of return is the return expected by the investors for investing in a particular stock. If there is an increase in the required return on equity, then the present value of future dividends will be discounted at a higher rate, which will result in a lower stock value. Hence, the correct answer is C.

According to the Gordon-Growth Model, an Increase in the Required