Question

1. Identify the relation between a stock’s price and the factors that determine the price, based on the constant-growth dividend valuation model:

For example, the relationship is positive if an increase in the factor results in an increase in the share price.

	Relationship with share price
Factor	Positive or negative
Current Dividend
Growth rate of dividends
Required Rate or Return

Answer 1

The value of stock

=

Expected Dividend per share/ (cost of capital - Dividend growth rate)

Factor	Positive or negative
Current Dividend	Positive
Growth rate of dividends	Positive
Required Rate or Return	Negative