In the Constant-Growth Model, the Market Return Must Be ____

question 1

Multiple Choice

In the constant-growth model, the market return must be ____ the dividend growth rate in order for the formula price to be meaningful.

• A)less than
• B)equal to
• C)greater than
• D)proportional to

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Definitions:

Trade Credit

A type of commercial financing where a buyer is allowed to purchase goods or services and pay the supplier at a later scheduled date.

Accounts Payable Balance

Accounts payable balance represents the total amount a company owes to its suppliers or creditors for purchases made on credit.

Costly Trade Credit

Refers to the higher cost associated with buying goods or services on credit, when compared to paying cash upfront, due to interest or fees imposed by the seller.

Effective Annual Rate

The real return on an investment, accounting for the effect of compounding over a period.