If Two Firms Have the Same Current Dividend and the Same

question 47

True/False

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

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Definitions:

Forecasting Risk

The possibility that errors in projected cash flows lead to incorrect decisions.

Projected Sales

An estimate of the amount of revenue that a company expects to generate in a future period.

Sensitivity Analysis

Investigation of what happens to NPV when only one variable is changed.

Capital Budgeting

The process in which a business evaluates and selects its long-term investments based on their potential financial returns.