Consider the Constant Growth DDM

question 18

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 inflationary environment with inflation at 4%,a share of KD Picture Frame's stock should be worth ________.

• A) $21.10
• B) $31.25
• C) $32.45
• D) $62.50
• E) none of these

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A U.S. federal agency established for the purpose of protecting consumers and promoting competition by preventing anticompetitive, deceptive, and unfair business practices.

Clayton Act

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