Which of the following statements is CORRECT? (Hint: Dividend yield (D1/P0) is the difference between Re and g. Calculate Re first by using CAPM.) A B Beta 1.10 0.90 Constant growth rate 7.00% 7.00% Stock A must have a higher stock price than Stock B. Stock A must have a higher dividend yield than Stock B. Stock B’s dividend yield equals its expected dividend growth rate. Stock B must have the higher required return. Stock B could have the higher expected return.

Which of the following statements is CORRECT? (Hint: Dividend yield (D1/P0) is the difference between Re and g. Calculate Re first by using CAPM.) A B Beta 1.10 0.90 Constant growth rate 7.00% 7.00% Stock A must have a higher stock price than Stock B. Stock A must have a higher dividend yield than Stock B. Stock B’s dividend yield equals its expected dividend growth rate. Stock B must have the higher required return. Stock B could have the higher expected return.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 25P

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