3. A stock is expected to pay a year-end dividend of $2.00 a share (D₁ = $2.00). The dividend is

expected to decline at a rate of 5% a year constantly (g = -5%). The companys expected and

required rate of return is 15%. Which of the following statements is CORRECT?

a. The companys current stock price is $20.

b. The companys dividend yield 5 years from now is expected to be 10%.

c. The companys stock price next year is expected to be $9.50.

d. The companys expected capital gains yield is 15%.

e. The constant growth model cannot be used because the growth rate is negative.