Question

Which of the following statements is incorrect regarding the constant growth model?

Group of answer choices

If the dividend growth rate is zero, the constant growth model becomes a zero-growth valuation model.

The constant growth model can still be used if the required rate of return is less than the dividend growth rate.

Another name for the dividend to be received in one year divided by the current stock price is the expected dividend yield.

The constant growth model calculates the value of a cash flow that grows at a constant rate over a infinite time horizon.

The constant growth model assumes that earnings, dividends and stock prices are expected to grow at a constant rate.

Answer #1

FOr this model to work, required rate must be higher than dividend growth rate. If not, denominator would be negative, which would mean negative share price, which is not possible.

**Correct statement is: The constant growth model can
still be used if the required rate of return is less than the
dividend growth rate.**

Which of the following statements is incorrect regarding the
constant growth model?
a.Another name for the dividend to be received in one year
divided by the current stock price is the expected dividend
yield.
b.The constant growth model assumes that earnings, dividends and
stock prices are expected to grow at a constant rate.
c.If the dividend growth rate is zero, the constant growth model
becomes a zero-growth valuation model.
d.The constant growth model can still be used if the required...

16. Which of the following statements is CORRECT? (2pts)
a. The constant growth model takes into consideration the
capital gains investors expect to earn on a stock
b. It is appropriate to use the constant growth model to
estimate a stock's value even if its growth rate is never expected
to become constant.
c. If a stock has a required rate of return ke = 12%, and if its
dividend is expected to grow at a constant rate of 5%,...

Which of the following is not true? Group of answer choices
The dividend growth model seeks to estimate the current market
value of a stock by calculating the total future value of the
future dividend payments.
The dividend growth model cannot be used to estimate the current
market value of stocks of firms that don’t issue any dividends.
There are ways other than the dividend growth model to conduct
stock valuation, including multiplying a benchmark
Price-to-Earnings ratio with earnings per...

Explain the difference between using the zero-growth dividend
valuation model and the constant-growth dividend valuation model
when finding the intrinsic value of common stock and preferred
stock.
How does adding a growth rate to the valuation process affect
the intrinsic value?

Which of the following statements is most correct? Select
one:
a. The constant growth model is often appropriate for companies
that the dividend growth rate is larger than its required rate of
return on stock.
b. The constant growth model is often appropriate for companies
that never pay dividend.
c. Two firms with the same dividend and growth rate should have
the same stock price.
d. The constant growth model can be applied to companies that
expect zero dividend growth...

Which of the following statements is most correct?
Select one:
a. The constant growth model is often appropriate for companies
that never pay dividend.
b. The constant growth model is often appropriate for mature
companies with a stable history of growth.
c. Two firms with the same dividend and growth rate must also
have the same stock price.
d. The constant growth model cannot be applied to companies that
expect zero dividend growth rate.
e. The constant growth model is...

Expected returns, dividends, and growth
The constant growth valuation formula has dividends in the
numerator. Dividends are divided by the difference between the
required return and dividend growth rate as follows:
P̂0
=
D1/(rs −
gL)
Which of the following statements best describes how a change in
a firm’s stock price would affect a stock’s capital gains
yield?
a.The capital gains yield on a stock that the investor already
owns has an inverse relationship with the firm’s expected future
stock...

Quantitative Problem 1: Hubbard Industries just
paid a common dividend, D0, of $1.00. It expects to grow
at a constant rate of 3% per year. If investors require a 10%
return on equity, what is the current price of Hubbard's common
stock? Do not round intermediate calculations. Round your answer to
the nearest cent.
$ per share
Zero Growth Stocks:
The constant growth model is sufficiently general to handle the
case of a zero growth stock, where the dividend is expected...

Quantitative Problem 1: Hubbard Industries just
paid a common dividend, D0, of $1.30. It expects to grow
at a constant rate of 4% per year. If investors require a 10%
return on equity, what is the current price of Hubbard's common
stock? Round your answer to the nearest cent. Do not round
intermediate calculations.
$ per share
Zero Growth Stocks:
The constant growth model is sufficiently general to handle the
case of a zero growth stock, where the dividend is...

Answer the following questions regarding dividend discount
models:
What are the two components of most stocks’ expected total
return?
What is the general formula to calculate the capital gains yield
and the dividend yield of a stock
(one that holds when firm’s dividends are growing at a constant
rate and when they are not)?
Write out and explain the dividend discount model formula for a
constant growth stock. What is
the capital gains yield and dividend yields for a constant...

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