question 2

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. If a stock has a required rate of return t, - 12% and its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5% The stock valuation model, Pg - D/t, - 8), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate, The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate. The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time