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

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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 12QTD

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Question

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

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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