Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's price one year from now is expected to be 6% below the current price. If two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return, the two stocks must have the same dividend per share. If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's dividend yield is 6%. For the constant growth model to hold, a firm's cost of equity (rs) needs to be smaller than its constant dividend growth rate (i.e., r, g).
Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's price one year from now is expected to be 6% below the current price. If two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return, the two stocks must have the same dividend per share. If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's dividend yield is 6%. For the constant growth model to hold, a firm's cost of equity (rs) needs to be smaller than its constant dividend growth rate (i.e., r, g).
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
8th Edition
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter9: Stocks And Their Valuation
Section: Chapter Questions
Problem 6DQ
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