The Required Rate of Return for Common Stock Is K_e

question 70

Multiple Choice

The Required Rate of Return for common stock is K_e = (D₁/P₀) + g. What are the assumptions of the model?

• A) Growth (g) is constant to infinity.
• B) The price earnings ratio stays the same.
• C) The firm must pay a dividend to use this model.
• D) All of these options are assumptions of the model.

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