The dividend-growth model may be used to value a stock:

V = D₀(1+g) / k-g
a.What is the value of a stock if:
D₀ = $2
k = 10%
g = 6%

b. What is the value of this stock if the dividend is increasedto$3 and the other variables
remain constant?
c. What is the value of this stock if the required returndeclinesto 7.5 percent and the
other variables remain constant?
d. What is the value of this stock if the growth rate declines to4percent and the other
variables remain constant?
e. What is the value of this stock if the dividend is increasedto$2.30, the growth rate
declines to 4 percent, and the required return remains 10 percent?

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Irving HeathcoteLv2

28 Sep 2019

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Which of the following statements is true about the constant growth model

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Need Explanation andDetail in Excel Format:

1 The corporate treasurer of Ajax Company expects the company togrow at 4% in the future, and debt securities
at 6% interest (tax rate = 30%) to be a cheaper option to financethe growth. The current market price per share
of its common stock is $39, and the expected dividend in one yearis $1.50 per share. Calculate the cost of the company's
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What would be the minimum expected return from a new capitalinvestment project to satisfy the suppliers of the capital?
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0 -$2,000 -$2,500
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3 $1,300 $800
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fuchsiasquirrel354

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