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Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm's stock at the end of four years (P_{4}) can be calculated using D_{5}/(r - g) and P_{0} (1 + g)^{4}.

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True False

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True

The total rate of return earned on a stock is comprised of the dividend yield and the capital gains yield.

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True False

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True

The dividend growth model assumes that dividends increase at a constant rate forever.

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True False

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True

According to the constant growth model, the dividend yield is equal to the required return minus the dividend growth rate.

True False

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All else constant, a decrease in the dividend amount will increase the dividend yield of a stock.

True False

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Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price now, from the past and into the future.

True False

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All else constant, an increase in the dividend amount will increase the dividend yield of a stock.

True False

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Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price into the future.

True False

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A decrease in the dividend growth rate will increase a stock's market value, all else the same.

True False

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An increase in the required return on a stock will decrease its market value, all else the same.

True False

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All else constant, a decrease in the stock price will increase the dividend yield of a stock

True False

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Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are told Stable's most recent dividend paid, its dividend growth rate, and a discount rate, you can only calculate the price now.

True False

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The dividend growth model can be used to compute a stock price at any point of time.

True False

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If one uses the constant growth model to value stock, one assumes that P_{1} = P_{0} (1 + g), P_{2} = P_{0} (1 + g), etc.

True False

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Dividends paid by a corporation can reduce the taxable income of the corporation.

True False

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All else constant, an increase in the stock price will increase the dividend yield of a stock.

True False

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