Holding other things constant,a stock's value will be highest if the investor's required return on investments in equity is

Question

Quizplus · Accepted Answer

According to the dividend discount model, a stock's value is directly affected by the investor's required return. The required return is also known as the cost of equity. As the cost of equity increases, the value of the stock decreases. Therefore, if the investor's required return is lower, the stock's value will be higher. Among the given options, the lowest required return is 5%, so the stock's value will be highest if the investor's required return on investments in equity is 5%.

Holding Other Things Constant,a Stock's Value Will Be Highest If