Which of the following statements is most correct? Other things equal, the higher the dividend growth rate, the lower the stock value. Other things equal, the lower the market value of debt, the lower the value of equity. Other things equal, the lower the dividends, the lower the stock value. Other things equal, the longer the investment holding period, the lower the stock value. Other things equal, the higher the required rate of return, the higher the stock value.

Which of the following statements is most correct? Other things equal, the higher the dividend growth rate, the lower the stock value. Other things equal, the lower the market value of debt, the lower the value of equity. Other things equal, the lower the dividends, the lower the stock value. Other things equal, the longer the investment holding period, the lower the stock value. Other things equal, the higher the required rate of return, the higher the stock value.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter15: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 4Q: One position expressed in the financial literature is that firms set their dividends as a residual...

See similar textbooks

Similar questions

Apart from using PE ratio, what is another way of valuing the stock price? if we have the EPS, Share Price, Dividend Per Share, ROE and the discount rate (R). And what are the assumptions and the limitations of this model? What can be said about the dividend growth model? Similarly what can be said about the capital asset pricing model?
Which statement is correct, all else held constant? A. If you have both the dividend growth and the security market line's costs of equity, you should use the higher of the two estimates when computing WACC. B. The aftertax cost of debt increases when the market price of a bond increases. C. A decrease in a firm's WACC will increase the attractiveness of the firm's investment options. D. Beta is used to compute the return on equity and the standard deviation is used to compute the return on preferred.
Which of the following statement is most correct? When we are using the dividend growth model to compute the cost of capital for common stocks, the cost of capital declines if the expected growth rate declines, holding other factors constant. When we are using the dividend growth model to compute the cost of capital for common stocks, the cost of capital declines if the expected growth rate increases, holding other factors constant. When we are using the dividend growth model to compute the cost of capital for common stocks, the cost of capital does not change if the expected growth rate declines, holding other factors constant. It is impossible to determine how the cost of common equity changes when expected growth rate changes, holding other factors constant in dividend growth model.
Which statement is NOT correct? Multiple Choice O O O As the payout ratio goes up, the stock price also goes up. DDM can be used to calculate the terminal value. According to DDM, the discount rate should be greater than the growth rate of dividends. According to DDM formula, there is a one period lag between the times of stock price and the dividend payment. If the payout ratio is fixed, the growth rates of earnings and dividends are same.
How do stock prices vary with the following: 1. the expected growth rate of dividends (earnings); 2. the benchmark (risk-free) interest rate: 3. the equity premium
The Capital Asset Pricing Model (CAPM) says that the risk premium on a stock is equal to its beta times the market risk premium. ..... True False
Which 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
1. What effect does increasing inflation expectations have on the required returns of investors in common stock? 2. Explain the specific relationship between risk and reward and why this relationship must be true.
Which of the following statements is true? A. Because of flotation costs, dollars raised by retaining earnings must work harder than dollars raised by selling new shares. B. All other things being equal, a call option price will increase, and a put option price will decrease if an exercise price increases. C. Security market line (SML) plots return against total risk which is measured by the standard deviation of returns. D. Because potential long-term returns, income from rent-payments, diversification, and inflation hedge, real-estate would be a good investment.
In the Gordon Growth (dividend discount) Model, the growth rate is assumed to be the required return on equity. a. proportional to O b. Blank O c. equal to O d. greater than O e. less than
What happens when investors rate of return is greater than YTM and coupon rates?
Give typing answer with explanation and conclusion