Chapter 9 - Chapter 9 1. Stock X has the following data....

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Chapter 9 1. Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D 1 $3.00 Current Price, P 0 $50 Expected constant growth rate 6.0% a. The stock’s required return is 10%. b. The stock’s expected dividend yield and growth rate are equal. c. The stock’s expected dividend yield is 5%. d. The stock’s expected capital gains yield is 5%. e. The stock’s expected price 10 years from now is $100.00. b The correct answer choice is b. One could quickly calculate the dividend yield and see that it equals the growth rate, but here are some numbers that provide more information. D 1 $3.00 D 1 /P 0 6.0% P 0 $50.00 r X 12.0% g 6.0% 2. Which of the following statements is NOT CORRECT? a. The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends. b. The corporate valuation model discounts free cash flows by the
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This note was uploaded on 11/28/2010 for the course FIN 3403 taught by Professor Avondstost during the Fall '10 term at Miami Dade College, Miami.

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Chapter 9 - Chapter 9 1. Stock X has the following data....

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