Which of the Following Statements Is CORRECT

question 48

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 r_s = 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.

---

Definitions:

Federal Income Taxes

Taxes levied by the federal government on the annual income of individuals and businesses, used to fund public services and government operations.

Military Spending

Financial allocation by a government for the maintenance and operations of armed forces, including expenses related to equipment, personnel, and infrastructure.

Lawmakers

Lawmakers are elected or appointed officials responsible for making and enacting the laws that govern a state or country.

Immigrants

People who move to a country other than their own in order to settle there, either temporarily or permanently.