If a stock's dividend is expected to grow at a constant rate of 5% a year, which of the followingstatements is correct?Select one:O a.O b.O c.The stock's dividend yield is 5%.The price of the stock is expected to decline in the future.The stock's required return must be equal to or less than 5%.Od. The stock's price one year from now is expected to be above the current price.e. The expected return on the stock is 5% a year.

Whenever there is a growth in dividend, it will automatically increase the value of stock in future.…

Answered: If a stock's dividend is expected to…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 4P

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If a stock's dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT? Briefly explain your choice. a. The stock's dividend yield is 5%. b. The price of the stock is expected to decline in the future. c. The stock's required return must be equal to or less than 5%. d. The stock's price one year from now is expected to be 5% above the current price. e. The expected return on the stock is 5% a year.
If a stock's dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium. a. The stock's dividend yield is 5%. b. The price of the stock is expected to decline in the future. c. The stock's required return must be equal to or less than 5%. d. The stock's price one year from now is expected to be 5% above the current price. e. The expected return on the stock is 5% a year.
A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it should continue to grow at a constant rate of 10% a year. If its required return is 15%, what is the stock's expected price 1 year from today? Do not round intermediate calculations. Round your answer to the nearest cent.
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