The constant dividend growth valuation model uses the value of a firm’s dividends in the numerator of the equation. Divi

[answerhappygod]

The constant dividend growth valuation model uses the value of a
firm’s dividends in the numerator of the equation. Dividends are
divided by the difference between investors’ required return and
the dividend growth rate, as follows:
Pˆ0Pˆ0 = D1(rs − g)D1rs − g
Which of the following statements best describes how a change in
a firm’s stock price would affect a stock’s capital gains
yield?
The capital gains yield on a stock that the investor already
owns has a direct relationship with the firm’s expected future
stock price.
The capital gains yield on a stock that the investor already
owns has an inverse relationship with the firm’s expected future
stock price.
Consider the case of Walter Utilities:
Walter Utilities is a dividend-paying company and is expected to
pay an annual dividend of $1.65 at the end of the year. Its
dividend is expected to grow at a constant rate of 6.00% per year.
If Walter’s stock currently trades for $19.00 per share, the
average investor should expect to earn a return of
%. (Note: Round your answer to two decimal places.)
Which of the following conditions must hold true for the
constant growth valuation formula to be useful and give meaningful
results?
The company’s stock cannot be a zero growth stock.
The required rate of return, rss, must be greater than the
long-run growth rate.
The company’s growth rate needs to change as the company
matures.