Which of the Following Statements Is CORRECT

question 48

Multiple Choice

Which of the following statements is CORRECT?

• A) Two firms with the same expected dividend and growth rates must also have the same stock price.
• B) It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
• C) If a stock has a required rate of return r_s = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.
• D) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
• E) The constant growth model takes into consideration the capital gains investors expect to earn on a stock.

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Definitions:

Psychological Health

refers to the emotional and mental state of an individual, encompassing well-being, the ability to manage stress, and effective functioning in society.

Distorted Judgment

The phenomenon of making decisions or assessments that are skewed by biases, misinformation, or emotional influences.

Goal-directed Expectations

Anticipations or beliefs about the ability to achieve specific outcomes through one's actions, which guide goal-setting and behavior.

Agency

The capacity of individuals or groups to act independently and make their own free choices.