If Two Firms Have the Same Current Dividend and the Same

question 86

Multiple Choice

If two firms have the same current dividend and the same expected growth rate,their stocks must sell at the same current price or else the market will not be in equilibrium.

• A) False, because the required return could be different
• B) True, because we are using a dividend valuation model
• C) True if markets are semi-strong form efficient
• D) True if investors are risk-averse

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Definitions:

Social Hierarchy

The organization of individuals into levels of power, status, and authority within a society.

Influencing Factors

Influencing factors are various elements or conditions that affect the outcome or development of a process, decision, or behavior.

Meritocracy

A societal system in which advancement and rewards are based on individual ability and achievement rather than on class privilege or wealth.

Wealth

The abundance of valuable resources or material possessions, or the control of such assets.