Asked by Jason
The cost of capital for common stock is ke=(d1/Po)+g. What are the assumptions of the model?
A. growth (g) is constant to infinity
B. The price earnings ration stay the same
C. The firm must pay a dividend to use this model
D All of the above are assumptions of the model
I rean in the tex book ... for a constant growth stock, the following conditions must hold:
1. the expected dividend yield is constant
2. the dividend is expected to grow forever at a constant rate.
that means that D is the correct answer, because the company must pay a dividend to make all of these things happen.
Is that correct???
A. growth (g) is constant to infinity
B. The price earnings ration stay the same
C. The firm must pay a dividend to use this model
D All of the above are assumptions of the model
I rean in the tex book ... for a constant growth stock, the following conditions must hold:
1. the expected dividend yield is constant
2. the dividend is expected to grow forever at a constant rate.
that means that D is the correct answer, because the company must pay a dividend to make all of these things happen.
Is that correct???