According to the constant dividend growth model, what is the required return on a stock (RE) if the growth rate (g) is zero? Multiple choice question. RE = D1 / P0 RE = D1 – P0 RE = D0 / P0 RE = D1 + P0
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According to the constant dividend growth model, what is the required return on a stock (RE) if the growth rate (g) is zero?
RE = D1 / P0
RE = D1 – P0
RE = D0 / P0
RE = D1 + P0
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- The dividend yield (i.e. D1/P0) is a good measure of the expected return on a common stock under which of the following circumstances? g = 0 g > 0 g < 0 g is expected to remain constant over time under no circumstancesWhen using the two - stage dividend growth model,:Multiple Choiceg1 cannot be negative. Pt = Dt/R. g1 must be greater than g2. g1 can be greater than R. R must be less than g1 but greater than g2.If D0 is the dividend just paid, D1 is the next dividend, and g is the constant growth rate, then Dt, the dividend t periods in the future, is given by Blank______. Multiple choice question. Dt = D0 × (1 − g)t Dt = D1 × (1 − g)t Dt = D0 × (1 + g)t Dt = D1 × (1 + g)t
- Suppose stock A's return is related to the market return by: RetA=0.6*Market Return + 0.04* (Market Return)² What is the change in stock A given a change in the market return? Suppose stock B's return is related to the market return by: RetB=0.6*Market Return What is the difference in returns between A and B if the market return is 5%? What is the difference if the market return is -5%?The formula for calculating the cost of equity capital using the dividend growth model approach is Blank______. (RE denotes the cost of equity, D1 is the next period’s projected dividend, g is the growth rate, and P0 is the current stock price.) Multiple choice question. RE = D1 /(P0 + g) RE = (D1 /P0) /g RE = D1 /P0 + g RE = D1 /P0 – gWhich of the following statements is true about the constant dividend growth model? Group of answer choices 1. When using a constant growth model to analyze a stock, if an increase in the required rate of return occurs while the growth rate remains the same, this will lead to no change in the value of the stock 2. When using a constant growth model to analyze a stock, if an increase in the required rate of return occurs while the growth rate remains the same, this will lead to a decreased value of the stock 3. When using a constant growth model to analyze a stock, if an increase in the required rate of return occurs while the growth rate remains the same, this will lead to a increased value of the stock
- Which of the following formulas is INCORRECT? O A. Div = EPS, X Dividend Payout Rate OB. TE= (Div/P)+g OC. PN(Eg) × Div N+1 O D. earnings growth rate= retention rate x return on new investmentWhich of the following assumptions would cause the constant growth stock valuation model to be invalid? The constant growth model is given below: P0 = D0(1+g)/rs - g Select one: a. The growth rate is more than the required rate of return b. The growth rate is negative c. The growth rate is zero d. None of the assumptions would invalidate the model e. The growth rate is less than the required rate of returnmultible choice, In applying the constant-growth dividend model, increasing the market capitalization rate will cause a stock’s intrinsic value to? why? decrease increase remain unchanged. decrease or increase, depending upon other factors.
- The constant growth dividend discount model (DDM) may be written as Ⓒfo = Do/(P₁ + 8) P₁ =D₁/(r₁-8) P = Do/(r,+8) fo=D₁/(P₁-8) OP=D₁/(r₁-8)So if the Return = (Total Dividend + change in market price ) / purchase Price, then why is the annual return not calculated that way??What is the formula for the required return on a stock? Multiple choice question. r = P0D1P0D1 + g r = D1P0D1P0 – g r = D1P0D1P0 + g r = D1gD1g + P0