Which of the following statements is true about common stock dividends? Multiple choice question. They may grow at a constant rate. They always grow at a differential rate. They always grow at a constant rate. They never grow.
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Which of the following statements is true about common stock dividends?
They may grow at a constant rate.
They always grow at a differential rate.
They always grow at a constant rate.
They never grow.
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- The Dividend-Discount Model (DDM) can only be used to value stocks that are currently paying dividends. True FalseWhat happens to the price of a stock when the stock goes “ex-dividend”? a) it decreases b) it doesn’t change c) it increases d) there is no relationship between dividends and stock prices“The constant-growth model should not be used with just any stock.” Explain with reasons the assumptions used by analysts when using the constant- growth dividend model.
- If we dont have earnings and don't have dividends, how can we figure out what the value of the stock is?The dividend growth model is only useful for estimating a stock's value when the A. Stock's beta is strickly less than the market beta B. Stock's required return is strictly less than the constant growth rate in dividends C. Stock's growth rate in dividends is strictly greater than zero D. Stock pays dividendsThe dividend growth model of stock evaluation relies on several assumptions that might not be true in the real world. What are they?
- Which one of the following methods is not derived from the principle that the value of a stock is the present vaiue of future dividends. O Discounted cash flow method O Discounted dividend method O Abnormal earnings O Price multiple method O Abnormal earnings growthSuppose we observe from market data that, for a given non-dividend paying stock, See ImageWhat might explain the inequality in this relationship, is markets are efficient or does result in arbitrage opportunities?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.
- The constant-growth dividend model will provide invalid solutions when: the growth rate of the stock exceeds the required rate of return for the stock. the growth rate of the stock is less than the required rate of return for the stock. the growth rate of the stock is equal to the risk-free rate. none of the above.Suppose we observe from market data that, for a given non-dividend paying stock, F, ± Soer. What might explain the inequality in this relationship (i.e. why don't we observe Fo = Soe"T) if markets are efficient? Hint: try to identify real-world market frictions that might cause cases where Fo + Soe™" does not result in arbitrage opportunitiesSuppose we observe from market data that, for a given non-dividend paying stock, F, ± Soer. What might explain the inequality in this relationship (i.e. why don't we observe Fo = Soer") if markets are efficient? Hint: try to identify real-world market frictions that might cause cases where F, + S,e! does not result in arbitrage opportunities rT
