1. The dividend discount model should not be used to value stocks if the dividend does not grow.

true

false

2 .A stock is selling for $37.50 and is expected to pay a dividend of $3 at the end of the year. If investors expect a return of 14%, what is the dividend growth rate?

4%
		5%
		6%
		7%

3.

Herb Garden will pay $4 annual dividend on their common stock in the coming year. This dividend increases at an average rate of 4% per year. The stock is currently selling for $80 a share. What is the market required rate of return on Herb Garden common stock?

10.25%

6.25%

9%

11.3%