Question 1

About cash dividend, which statements are CORRECT?

Check all that apply:

Company's book value per share drops by cash dividend amount per share when dividend is paid out

By dividend payout, the firm's book value and market value both decline by the same dollar amount per share

The drop in stock price by the amount of cash dividend makes the stock undervalued as it becomes cheaper

Company's stock price will immediately decline in response to cash dividend payout

Question 2

About DDM and stock valuation, which statements are CORRECT?

Check all that apply:

Stocks that don't pay dividend, such as, Amazon, Google, Facebook, etc., still have huge value. This contradicts DDM model

The stock price computed by DDM is ex-dividend, meaning the price prior to the current dividend being paid out

By Dividend Discount Model (DDM), if a company is expected to never ever pays any cash in the future, its stock should be worth zero

Other variables held constant, there is an inverse relation between stock prices and interest rates

In DDM, the risk-adjusted discount rates should be higher than the corresponding treasury spot rates