Question $5$

Suppose DeepSea Inc. will pay $$1\mathrm{.}50$ per share in dividends next year. The require return on the

stock is $10\%$ and its dividends will grow by $2\%$ per year indefinitely. Under which of the

following scenarios would you be willing to pay more than $$18\mathrm{.}75$ today?

A$.$All else being equal, the required return is more than $10\%.$

B$.$ All else being equal, the dividend next year will be $$1\mathrm{.}20.$

C$.$All else being equal, the growth rate of the dividends is greater than $2\%.$

D$.$ You would be willing under both $(A)$ and $(C).$