the growth rate must be less than the cost of equity the cost of equity must

The growth rate must be less than the cost of equity

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the growth rate must be less than the cost of equity the cost of equity must not include a beta the growth rate must be constant the growth rate must be greater than the cost of equity Question 8 The perpetual growth rate assumption in the model is __________. not reasonable appropriate reasonable realistic Question 9 If a firm does not pay a dividend, the constant growth model can still be used as long as __________. this model cannot be used without a dividend the average market dividend is used the average industry dividend is used you use a constant assumption for the dividend Question 10 Given a growth rate of 5%, a current dividend of $1.50, and an expected return of 12%, what is the numerator of the constant growth model? $1.50 $1.58 $1.68 $1.76 Question 11 The constant growth model will likely be most appropriate for __________. mature firms growth firms value firms all firms equally Question 12 Dividends are beneficial, except for which of the following reasons?
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They ensure that debt or equity remains constant. They remove excess money that may not be used efficiently. They convey information. They provide a steady payment. Question 13 To solve for the cost of capital, the constant growth model can be manipulated into which of the following? = D 1 / P 0 + g = D 1 / g + P 0 = D 1 / P 0 + g / D 1 No manipulation exists to solve for the cost of capital.
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  • Spring '14
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