Consider the Constant Growth DDM

question 60

Multiple Choice

Consider the constant growth DDM.In a non-inflationary environment,KD Picture Frame Company is expected to pay a dividend of $2.60 in the coming year,the growth rate of dividends is expected to be 0%,and the required return on the stock will be 8%.If the inflation rate is 4%,KD Picture Frame Company is expected to pay a dividend of $2.70 in the coming year,the dividend growth rate will be 4%,and the required return on the stock will be 12.32%.In the non-inflationary environment,a share of the KD Picture Frame's stock should be worth _________.

• A) $20.00
• B) $30.00
• C) $31.25
• D) $32.50
• E) none of these

---

Definitions:

Commitment

The emotional or psychological attachment an individual feels towards a cause, activity, or institution.

Compliance

The act of conforming to a request, rule, or specification.

Resistance

Opposition to change or the refusal to accept new ideas.

Adherence

The extent to which individuals stick to prescribed guidelines, rules, or treatment plans.