Which of the following statements is CORRECT?

a. If a stock has a required rate of return r s = 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%.

b. The stock valuation model, P 0 = D 1 /(r s g), can be used to value firms whose dividends are

expected to decline at a constant rate, i.e., to grow at a negative rate.

c. The price of a stock is the present value of all expected future dividends, discounted at the

dividend growth rate.

d. The constant growth model cannot be used for a zero growth stock, where the dividend is

expected to remain constant over time.

e. 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.