Which of the Following Statements Is Correct

question 75

Multiple Choice

Which of the following statements is correct?

• A) The constant growth DCF model can be used to value a stock only if the stock's dividends are expected to grow forever at a constant rate which is less than the required rate of return on the stock.
• B) If the growth rate is negative,the constant growth DCF model cannot be used.
• C) The constant growth DCF model may be written as r₀ = D₀/P₀ + g.
• D) The constant growth DCF model may be written as P₀ = D₀/(r + g).
• E) The constant growth DCF model may be written as P₀ = D₀/(r − g).

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Definitions:

Return On Assets

A profitability ratio that measures how efficiently a company can manage its assets to produce net income.

Debt-To-Equity Ratio

A gauge for the synergy of debt and equity in the financing framework of a company’s assets.

Current Ratio

This ratio evaluates the ability of a business to meet its short-term liabilities by utilizing its current assets.

Quick Ratio

A gauge of a business's capability to cover its short-term debts using its most readily accessible assets.