Which of the Following Statements Is CORRECT

question 86

Multiple Choice

Which of the following statements is CORRECT?

• A) If a stock has a required rate of return r_s = 12% and its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
• B) The stock valuation model, P₀ = D₁/(r_s − g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate.
• C) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
• D) The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time.
• E) The constant growth model is often appropriate for evaluating start-up companies that do not have a stable history of growth but are expected to reach stable growth within the next few years.

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Definitions:

Cooperative Advertising

A promotional strategy where manufacturers and retailers or distributors share the cost and execution of an advertising campaign.

Coupon

A voucher entitling the holder to a discount on a particular product or service or the redemption for a specific offer.

Target Stores

A chain of retail stores in the United States that offers a wide range of products including clothing, electronics, and household items.

Reverse Product Placement

A marketing strategy where fictional products from movies, television, or other media are created and sold in the real world, leveraging their established popularity.