Investors require an 8% rate of return on Mather Company's stock (i.e., rs = 8%). What is its value if the previous divi

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Investors require an 8% rate of return on Mather Company's stock
(i.e., rs = 8%). What is its value if the previous dividend was D0
= $1.00 and investors expect dividends to grow at a constant annual
rate of (1) -4%, (2) 0%, (3) 4%, or (4) 6%? Do not round
intermediate calculations. Round your answers to the nearest cent.
(1) $ (2) $ (3) $ (4) $
Using data from part a, what would the Gordon (constant growth)
model value be if the required rate of return was 8% and the
expected growth rate was (1) 8% or (2) 12%? Round your answers to
the nearest cent. If the value is undefined, enter N/A. (1) $ (2)
$
Are these reasonable results?
These results show that the formula does not make sense if the
required rate of return is equal to or less than the expected
growth rate.
These results show that the formula does not make sense if the
required rate of return is equal to or greater than the expected
growth rate.
These results show that the formula makes sense if the required
rate of return is equal to or less than the expected growth
rate.
These results show that the formula makes sense if the required
rate of return is equal to or greater than the expected growth
rate.
These results show that the formula does not make sense if the
expected growth rate is equal to or less than the required rate of
return.
Is it reasonable to think that a constant growth stock could
have g > rs?
It is reasonable for a firm to grow indefinitely at a rate
higher than its required return.
It is not reasonable for a firm to grow even for a short period
of time at a rate higher than its required return.
It is not reasonable for a firm to grow indefinitely at a rate
lower than its required return.
It is not reasonable for a firm to grow indefinitely at a rate
equal to its required return.
It is not reasonable for a firm to grow indefinitely at a rate
higher than its required return.