19 Do01 Which of the following statements is CORRECT? The constant growth model is often appropriate for evaluating start-up companies that do not have a stable history of growth but are expected to reach stable growth within the next few years. The stock valuation model, Po=D/rs - g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate. If a stock has a required rate of return r,- 12% and its dividend is expected to grow at a constant rate of 5%, then the stock's dividend yield is also 5%. The constant growth model cannot be used for a zero growth stock, wherein the dividend is expected to remain constant over time. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate. T-M 19 D 192 An increase in a firm's expected growth raya would cause its required rate of retim * possibly increase, possible possibly remain constant. O increase. O fluctuate more than before. O fluctuate less than before. O decrease. Work 04 - Chap : 1010 13:48 2 An increase in a firm's expected growth rate would cause its required rate of return to 1 possibly increase, possibly decrease, or possibly remain constant. Qincrease. O fluctuate more than before. O fluctuate less than before. Odecrease. 14:56