What is the stock price three years from now

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Reference no: EM131993977

1. Which of the following statements is CORRECT?

A. The stock valuation model, P0 = D1/(rs - g), cannot be used for firms with zero dividends growth.

B. All of the statements above are incorrect.

C. The stock valuation model, P0 = D1/(rs - g), cannot be used for firms that have negative growth rates.

D. The stock valuation model, P0 = D1/(rs - g), can be used for firms whose growth rates exceed their required return

E. The dividend yield on a constant growth stock equals its expected total return less its expected capital gains yield.

2. A stock just paid a dividend of $1. The required rate of return is rs = 11%, and the constant growth rate is 5%. What is the stock price three years from now?

A. $22.79 B. $15.61 C. $17.85 D. $25.00 E. $20.26

Reference no: EM131993977

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