Assume That You Are Using the Dividend Growth Model to Value

question 27

Multiple Choice

Assume that you are using the dividend growth model to value shares.If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the:

• A)market values of all shares to increase, all else constant.
• B)market values of all shares to remain constant as the dividend growth will offset the
• C)increase in the market rate.
• D)market values of all shares to decrease, all else constant.
• E)shares that do not pay dividends to decrease in price while the dividend-paying shares
• Maintain a constant price.
• m.dividend growth rates to increase to offset this change.

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Definitions:

Costly Activities

tasks or operations that require a high expenditure of resources, such as time, money, or labor.

New Product

A good, service, or idea that has not previously been brought to the market by its seller.

Tying

A sales practice where a seller requires the purchase of a second product or service together with the first.

Price Regulation

Price regulation involves the imposition of controls by a government or regulatory body on the amount charged for goods and services, often to protect consumers.