The Constant Growth Valuation Model Approach to Calculating the Cost

question 12

Multiple Choice

The constant growth valuation model approach to calculating the cost of equity assumes that

• A)earnings and dividends grow at a constant rate, but stock price growth is indeterminate
• B)the growth rate is greater than or equal to ke
• C)dividends are constant
• D)earnings, dividends, and stock price will grow at a constant rate

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Definitions:

Punishment

A consequence given in response to an unwanted behavior, intended to decrease the likelihood of that behavior occurring again.

Contingency

A future event or circumstance that is possible but cannot be predicted with certainty, often requiring planning for various outcomes.

Extinction

In behavioral psychology, the gradual weakening and eventual disappearance of a conditioned response when it is no longer reinforced.

Classical Conditioning

A learning process through which an innate response to a potent stimulus becomes triggered by a previously neutral stimulus.