A 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 (g = −5%).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.

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The Answer of A 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 (g = −5%).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.

A Stock Is Expected to Pay a Year-End Dividend of $2.00,i.e.,D1

A Stock Is Expected to Pay a Year-End Dividend of $2.00,i.e.,D₁