Which One of the Following Statements Is Correct Related to the Dividend

question 84

Multiple Choice

Which one of the following statements is correct related to the dividend growth model approach to computing the cost of equity?

• A)The rate of growth must exceed the required rate of return.
• B)The rate of return must be adjusted for taxes.
• C)The annual dividend used in the computation must be for year 1 if you are using today's stock price to compute the return.
• D)The cost of equity is equal to the return on the stock plus the risk-free rate.
• E)The cost of equity is equal to the return on the stock multiplied by the stock's beta.

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Definitions:

Operating Income

This metric reflects the profits earned from a company's core business operations, excluding non-operating income and expenses.

Cost Of Capital

The essential return rate an enterprise has to produce on its investment activities to sustain its market assessment and appeal to investors.

Cost Of Capital

The essential profit ratio a company is expected to reach in its investing endeavors to keep its marketplace value and attract financial backers.

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.