If the Expected ROE on Reinvested Earnings Is Equal to K

question 104

Multiple Choice

If the expected ROE on reinvested earnings is equal to k, the multistage DDM reduces to

• A) V₀ = (Expected dividend yield in year 1)/k.
• B) V₀ = (Expected EPS in year 1)/k.
• C) V₀ = (Treasury bond yield in year 1)/k..
• D) V₀ = (Market return in year 1)/k.

---

Definitions:

Domestic Supply

The total amount of a product or service that is available for consumption or use within a domestic market.

Trade Restrictions

Regulations imposed by governments to limit the free exchange of goods and services across borders, including tariffs, quotas, and embargoes.

Specific Tariff

A specific tariff is a fixed fee imposed by a government on each unit of imported goods, based on quantity rather than value.

Lump-Sum Tax

A fixed amount of tax that an individual or business is required to pay, regardless of income or transaction value.