Which of the following statements is CORRECT? A. The constant growth model takes

Question

Which of the following statements is CORRECT?
A. The constant growth model takes into consideration then the capital gains investors expect to earn on a stock B. Two firms with the same expected dividend and growth rate must also have the same stock price C. It is appropriate to use the constant growth model to estimate a stocks value even if it's growth rate is never expected to become constant D. If a stock has a required rate of return rs=12% and if it's dividend is expected to grow at a constant rate of 5%, this implies that the stocks dividend yield is also 5% E. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate Which of the following statements is CORRECT?
A. The constant growth model takes into consideration then the capital gains investors expect to earn on a stock B. Two firms with the same expected dividend and growth rate must also have the same stock price C. It is appropriate to use the constant growth model to estimate a stocks value even if it's growth rate is never expected to become constant D. If a stock has a required rate of return rs=12% and if it's dividend is expected to grow at a constant rate of 5%, this implies that the stocks dividend yield is also 5% E. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate
A. The constant growth model takes into consideration then the capital gains investors expect to earn on a stock B. Two firms with the same expected dividend and growth rate must also have the same stock price C. It is appropriate to use the constant growth model to estimate a stocks value even if it's growth rate is never expected to become constant D. If a stock has a required rate of return rs=12% and if it's dividend is expected to grow at a constant rate of 5%, this implies that the stocks dividend yield is also 5% E. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate

Explanation / Answer

Option E ie

The price of a stock is the present value of all expected future dividends discounted at dividend growth rate

is the correct option and rgis statement is correct

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