The Dividend Growth Model Can Be Used to Compute the Cost

question 55

Multiple Choice

The dividend growth model can be used to compute the cost of equity for a firm in which of the following situations?
I.firms that have a 100 percent retention ratio
II.firms that pay a constant dividend
III.firms that pay an increasing dividend
IV.firms that pay a decreasing dividend

• A)I and II only
• B)I and III only
• C)II and III only
• D)I, II, and III only
• E)II, III, and IV only

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Definitions:

Union Shop

A workplace where employees are not required to join the union to be hired, but must join shortly after commencing employment and remain members for as long as they are employed there.

Company Towns

Communities where nearly all stores and housing are owned by the one company that is also the main employer.

AFL

American Federation of Labor, a national federation of labor unions in the United States.

Samuel Gompers

An American labor union leader and a key figure in the founding of the American Federation of Labor (AFL).