Which of the Following Statements Is CORRECT

question 18

Multiple Choice

Which of the following statements is CORRECT?

• A) The constant growth model is often appropriate for evaluating start-up companies that do not have a stable history of growth but are expected to reach stable growth within the next few years.
• B) If a stock has a required rate of return r_s = 12% and its dividend is expected to grow at a constant rate of 5%,then the stock's dividend yield is also 5%.
• C) The stock valuation model,P₀ = D₁/(r_s - g),can be used to value firms whose dividends are expected to decline at a constant rate,i.e. ,to grow at a negative rate.
• 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 cannot be used for a zero growth stock,wherein the dividend is expected to remain constant over time.

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Definitions:

Boreal Forest

A large biome of coniferous forest located in the northern regions of the world, characterized by cold climates and long winters.

Coral Bleaching

occurs when corals lose their vibrant colors due to stress factors such as increased temperatures, leading to a weakened state with reduced growth and reproductive ability.

Zooxanthellae

A type of microscopic algae living symbiotically within the cells of coral and other marine organisms, providing them with energy through photosynthesis.