Which of the following statements is FALSE? A) We must discount the cash flows f

ID: 2656149 • Letter: W

Question

Which of the following statements is FALSE?

A) We must discount the cash flows from stock based on the equity cost of capital for the stock.

B) The divided yield is the percentage return the investor expects to earn from the dividend paid by the stock.

C) The firm might pay out cash to its shareholders in the form of a dividend.

D) The dividend yield is the expected annual dividend of a stock, divided by its expected future sale price.

A) We must discount the cash flows from stock based on the equity cost of capital for the stock.

B) The divided yield is the percentage return the investor expects to earn from the dividend paid by the stock.

C) The firm might pay out cash to its shareholders in the form of a dividend.

D) The dividend yield is the expected annual dividend of a stock, divided by its expected future sale price.

Answer:

Option D is the answer.

Reason:

Option A,B&C are all true

In option D , given the statement as The dividend yield is the expected annual dividend of a stock, divided by its expected future sale price.

But dividend yield = annual dividend ÷ price per share

In this statement instead of price per share , there is future sale price, so option D is False.

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