6. Constant growth stocks Aa Aa Consider the case of Urban Drapers Inc.: Urban Drapers Inc., a drapery company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $3.84 per share every year to its shareholders. In its most recent annual report, the company informed investors that it expects to maintain its constant dividend into the foreseeable future and that dividends are not expected to increase. If you are an investor who requires a 22.39% rate of return and you expect dividends to remain constant forever, then your expected valuation for Urban Drapers stock today is per share. Urban Drapers has a sister company named Super Carpeting Inc. (SCI). SCI just paid a dividend (Do) of $2.88 per share, and its annual dividend is expected to grow at a constant rate (gu) of 6.00% per year. If the required return (r) on SCI's stock is 15.00%, then the intrinsic value of SCI's shares is per share. Which of the following statements is true about the constant dividend growth model? When using a constant growth model to analyze a stock, if an increase in the dividend growth rate occurs while the required return remains the same, this will lead to an increase in the value of a stock. When using a constant growth model to analyze a stock, if an increase in the growth rate occurs while the required return remains the same, this will lead to a decreased value of the stock