Purchase Solution

Finance inquiries

Not what you're looking for?

Ask Custom Question

Which of the following statements is CORRECT?
A. The constant growth model takes into consideration the capital gains earned on a stock.
B. It is appropriate to use the constant growth model to estimate stock value even if the growth rate is never expected to become constant.
C. Two firms with the same expected dividend and growth rate must also have the same stock price.
D. If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
E. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate

Purchase this Solution

Solution Summary

This solution is comprised of a detailed explanation to answer which of the following statements is CORRECT.

Solution Preview

Which of the following statements is CORRECT?

A. The constant growth model takes into consideration the capital gains earned on a stock.

Correct.

B. It is appropriate to use the constant growth model to estimate stock value even if the growth rate is never expected to become ...

Purchase this Solution


Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.