Business, 18.08.2019 05:10 lee9724

Which of the following statements is correct? 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. 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%. the stock valuation model, p 0 = d 1/(r s - g), cannot be used to value firms whose dividends are expected to decline at a constant rate, i. e., to grow at a negative rate. the price of a stock is the present value of all expected future dividends, discounted at the stock's required rate of return. the constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time.

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