Which of the Following Statements Is CORRECT

question 6

Multiple Choice

Which of the following statements is CORRECT?

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

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Definitions:

Batteries

Electrochemical cells that convert stored chemical energy into electrical energy, used as a power source for numerous devices.

Acetic Acid

An organic compound with the chemical formula CH3COOH, which is a clear, sour-tasting liquid that is the main component of vinegar apart from water.

Vinegar

An acidic liquid produced from the fermentation of ethanol by acetic acid bacteria, used as a condiment and for preservation.

Acid Base

Refers to the balance between acids and bases in the body, crucial for maintaining physiological pH and metabolic functions.