Which of the following statements is CORRECT?
A. The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
B. Two firms with the same expected dividend and growth rate must also have the same stock price.
C. It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.
D. If a stock has a required rate of return rs= 12%, and if its dividend is expected to grow at a constant rate of 5%, then the stock's dividend yield is also 5%.
E. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
Answer: A
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a) 1586.8
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c) 13.33
d) 40.00
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Fill in the blank(s) with the appropriate word(s).
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Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000. Fixed factory overhead cost $38,500 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost
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