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SCI just paid a dividend (D_0) of $3.60 per share, and its annual dividend is expected to grow at a constant rate (g) of 7.50% per year. If the required return (r_s) on SCI's stock is 18.75%, then the intrinsic value of SCI's shares is per share.
 
Which of the following statements is true about the constant growth model?
When using a constant growth model to analyze a stock, if an increase in the growth rate occurs while the required return remains the same, this will lead to a decreased value of the stock.
When using a constant growth model to analyze a stock, if an increase in the growth rate occurs while the required return remains the same, this will lead to an increased value of the stock.
 
Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.:
 
a. If SCI's stock is in equilibrium, the current expected dividend yield on the stock will be_________ per share.
b. SCI's expected stock price one year from today will be_________ per share.
c. If SCI's stock is in equilibrium, the current expected capital gains yield on SCI's stock will be______?

 

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Vaishali Yadav
Vaishali YadavLv10
18 Jan 2021

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True or false:
-When using the Free Cash Flow method, the value of the entire firm is calculated. The amount of any LT debt must be subtracted from that value prior to calculating the stock's intrinsic value.
-Free Cash Flow is calculated in the same manner as is Cash Flow From Assets - it is the same value.
-The formula for the stock price using the dividend model with the non-growth assumption is = [ most recent dividend / Required Rate of Return]
-The formula for the stock price using the dividend model, constant growth assumption is = [most recent dividend / (Required Rate of Return - dividend growth rate)]
-The Required Rate of Return for a firm's stock is calculated with the CAPM. That Rate is also used as the Cost of Equity when calculating that firm's WACC.
-The formula for the constant growth dividend model implies that the return on a stock is composed of its dividend yield and dividend growth rate.

which of the following statements is correct concerning the constant-growth dividend valuation model?

a) an increase in the required rate of return will increase the value of the stock

b) an increase in the rate of growth of th dividends will decrease the value of the stock

c) the growth rate represents the total rate of return to the shareholder

d) the price of the stock will increase over time so long as the discount rate and the groth rate dont change

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