Question
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
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 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%. | ||
| The stock valuation model, P 0 = D 1/(r s - g), cannot 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 stock's required rate of return. | ||
| The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time.
PLEASE READ THE OPTIONS CAREFULLY! |
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