Using the Constant Growth Model,a Decrease in the Required Rate

question 46

Multiple Choice

Using the constant growth model,a decrease in the required rate of return from 15 to 13 percent combined with an increase in the growth rate from 5 to 6 percent would cause the price to

• A) Rise more than 50%.
• B) Rise less than 50%.
• C) Remain constant.
• D) Fall more than 50%.
• E) Fall less than 50%.

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