Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a constant rate of 6% a year,

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Which Of The Following Statements Is Correct If A Stock S Dividend Is Expected To Grow At A Constant Rate Of 6 A Year 1 (42.79 KiB) Viewed 26 times

Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's price one year from now is expected to be 6% below the current price. If two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return, the two stocks must have the same dividend per share. If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's dividend yield is 6%. For the constant growth model to hold, a firm's cost of equity (re) needs to be smaller than its constant dividend growth rate (i.e., rs< g). From the constant growth model, if the constant dividend growth rate is equal to zero, a firm's share price is equal to the constant dividend divided by the cost of equity (i.e., g=0).