Answer:
The correct answer is letter "D": requires that the dividend growth rate be less that the required rate of return.
Explanation:
The Gordon Growth Model is used to calculate the intrinsic value of a stock today, based on the stock's expected future dividends. It is widely used by investors and analysts to compare the predicted stock value against the actual market price. Its formula is:
P = D / r-g
where:
- P= current stock price
- g= dividend growth rate expected
- r= rate of return
- D= value of the dividends for the next year
The formula has limitations because <em>the rate of return must be higher than the dividend growth rate expected</em>. Otherwise, the resulting stock price would be negative and the model would be useless.
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Answer: $228.35
Explanation:
The Certainty Equivalent Cashflow is the amount that the project is expected to generate if it were invested in a risk free asset and then discounted at the company's required return.
Required return = Risk free rate + beta * market premium
= 5% + 1.25 * 8%
= 15%
Certainty equivalent cash flow
= $228.35
Answer:
Commerce.
Explanation:
It is concerned with distribution, exchange of goods and services and all activities which facilitates trade