When using the constant-growth dividend valuation model, which of the following will lower the value of the stock?
A) An increase in the required rate of return.
B) A decrease in the required rate of return.
C) An increase in the dividend payout ratio.
D) An increase in the growth rate of the dividends.

Question

Quizplus · Accepted Answer

An increase in the required rate of return will decrease the present value of the expected future cash flows, which will in turn lower the value of the stock. Decreases in the required rate of return, increases in the dividend payout ratio, and increases in the growth rate of dividends typically increase the value of the stock.

When Using the Constant-Growth Dividend Valuation Model, Which of the Following