Question1.

The following information is given for Beta Corp:

Recent eamings of $6

Payout ratio of 30%

Expected annual growth rate of 5%

> Cost of equity of 10%

The intrinsic value of the stock is closest to;

Which of the following is a potential weakness of the Gordon growth model?

A.It cannot be used to value broad equity market indices.

B.The model cannot be applied to non-dividend paying stocks

C.It is not applicable for valuing stable and mature dividend-paying