2. Which of the following statements about stock valuation is CORRECT? a. Two co

Question

2. Which of the following statements about stock valuation is CORRECT? a. Two constant growth firms with the same expected dividend and growth rates will also have the b. If a stock has a required rate of return r, 1296, and its dividend is expected to grow at a c. The price of a stock is th same stock price. constant rate of 5%, this implies that the stock's dividend yield is also 5%. e present value of all expected future dividends, discounted at the dividend growth rate. The discounted dividend model takes into consideration the capital gains investors expect to earn on a stock d.

Explanation / Answer

two constant growth firm with similar expected dividend and growth rate, need not have same stock price. might be required rate of return for both firm is different. Dividend yield is calculated by required return minus growth rate,

the discounted dividend model take into consideration the capital gain investor expect to earn on stock is correct for stock valuation of stock.

Option (D) is correct answer.

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