QUESTION 8

Which of the following statements is true about the general dividend valuation model?

	a.	It implies that the underlying value of a share of stock is determined by the markets expectations of the future dividends that the firm will generate
	b.	It implies that the value of a firms common stock can be determined only if the expected future dividends are infinite
	c.	It implies that the value of a growth stock can be determined by forecasting the future price of the stock
	d.	The model cannot be used to calculate the value of a common stock unless the dividends exceed the firms expected growth rate

QUESTION 9

The constant-growth dividend model will provide invalid solutions when

a.		the growth rate of the stock exceeds the required rate of return for the stock
b.		the growth rate of the stock is less than the required rate of return for the stock
c.		the growth rate of the stock is equal to the risk-free rate
d.		None of the above

QUESTION 10

Which of the following are the three simplifying assumptions that cover most stock growth patterns?

a.		Dividends remain constant over time, dividends grow at a constant rate, and dividends are equal to zero
b.		Dividends have a zero-growth rate, dividends grow at a varying rate, and dividends are equal to zero
c.		Dividends remain constant over time, dividends grow at a constant rate, and dividends have a mixed growth pattern
d.		None of the above