The Required Return on a Stock Is Equal to Which

question 101

Multiple Choice

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

• A)(P₀/D₁) - g
• B)(D₁/P₀)/g
• C)Dividend yield + Capital gains yield
• D)Dividend yield - Capital gains yield
• E)Dividend yield × Capital gains yield

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Definitions:

Excess Capacity Scenario

A situation where a company can produce more goods or services than currently demanded because of available resources exceeding production requirements.

Sales Increase

The rise in the amount of goods or services sold by a company within a specific period.

Capacity Level

The maximum output or production level that a facility, plant, or business can achieve under normal operations.

Net Working Capital Turnover

A ratio used to measure how effectively a company is using its short-term assets and liabilities to generate revenue.