Question

Choose all correct statements.

1.Dividend growth rate is equivalent to the dividend yield.

2.The total return on a stock is equal to the dividend yield plus the capital gains yield.

3.The benchmark PE ratio can be used to value the stock of firms that pay no dividends.

4.Assume the constant dividend growth model. An increase in the capital gains yield will increase the current value of a stock.

Answer 1

(B) total return on a stock is equal to the dividend yield + the Capital yields . it is a combination of the dividend which have been kept by the company and the capital gain which have been earned by the company.

(C) the benchmark price to earning ratio can be used for the valuation of various companies, which will be paying no dividend because the benchmark price to earning ratio is also based upon no dividend, as it is based upon an index value.

Rest of the two statements are not true.

Correct answer is option (B) and option (C)