Question

If u stock's dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium. O The stock's dividend yield is 5% The price of the stock is expected to decline in the future. The stock's required retum must be equal to or less than 5% O The stock's price one year from now is expected to be 5% above the current price. O The expected return on the stock is 5% a year. QUESTION 36 Daniel Sawyer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year, and he wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions Last year's sales SO $350 Last year's accounts payable $40 Sales growth rate + 8 30% Last year's notes payable $50 Last year's total assets - A0* $500 Last year's accruals $30 Last year's profit margin-PM 5% Target payout ratio 30% $102.80 $108.20 $113.08 $119.90

Answer 1

Answer

Option: The stock’s dividend yield is 5% is Incorrect, as the price of stock will increase, which is expected to grow.

Option: The price of the stock is expected to decline in the future is Incorrect, as the price of stock will increase, which is expected to grow.

Option: The stock’s required return must be equal to or less than 5% is Incorrect, as the price of stock will increase, which is expected to grow.

Option: The stock’s price one year from now is expected to be 5% above the current price is Correct, as it is expected to grow at a constant rate of 5% a year.

Option: The expected return on the stock is 5% a year is incorrect, as growth rate is 5% and not return from stock is 5%.

As per Chegg guidelines, I am supposed to answer maximum one question (First) is a post.