If a company's free cash flows are expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT?The stock is in equilibrium.
A) the company's stock's dividend yield is 5%.
B) the value of operations is expected to decline in the future.
C) the company's wacc must be equal to or less than 5%.
D) the company's value of operations one year from now is expected to be 5% above the current price.
E) the expected return on the company's stock is 5% a year.

Question

Quizplus · Accepted Answer

Statement d is true, because the value of operations is expected to grow at the free cash flow growth rate.

If a Company's Free Cash Flows Are Expected to Grow