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.

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Definitions:

Feeling

An emotional state or reaction, which can encompass physical sensations as well as moods and attitudes.

Inferiority

A feeling of being lower in status or quality than others, often leading to decreased self-esteem.

Adler

Alfred Adler, an Austrian medical doctor and psychotherapist, known for his contributions to psychology including the development of individual psychology and ideas about inferiority complex.

Individualism

A social theory favoring freedom of action for individuals over collective or state control.