Which of the Following Statements Is CORRECT, Assuming Stocks Are

question 76

Multiple Choice

Which of the following statements is CORRECT, assuming stocks are in equilibrium?

• A) Assume that the required return on a given stock is 13%.If the stock's dividend is growing at a constant rate of 5%, its expected dividend yield is 5% as well.
• B) A stock's dividend yield can never exceed its expected growth rate.
• C) A required condition for one to use the constant growth model is that the stock's expected growth rate exceeds its required rate of return.
• D) Other things held constant, the higher a company's beta coefficient, the lower its required rate of return.
• E) The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.

Comprehend the relationship between profit margin, retention ratio, and growth rates.

Analyze how dividend payout and retention ratios affect financial planning.

Estimate growth potential given operational capacity constraints.

Understand long-range financial planning and its timelines.

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