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Please help I am taking a test. Need answers asap! Which of the following statements is CORRECT? If a stock has a required rate of

Please help I am taking a test. Need answers asap! image text in transcribed
Which of the following statements is CORRECT? If a stock has a required rate of return tau_s = 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%. The constant growth model takes into consideration the capital gains investors expect to earn on a stock. It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant. Two firms with the same expected dividend and growth rate must also have the same stock price. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate. Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D_1 = $2.50), the dividend is expect to grow at a constant rate of 5.50% a year, and the common stock currently sells for $90.00 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings? 7.04% 5.59% 7.70% 6.58% 8.16%

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