Which of the following statements is true? A. If a company will never pay out dividends, the stock value is zero accordi...
Which of the following statements is true?
A. If a company will never pay out dividends, the stock value is zero according to the dividend valuation models.
B. If a stock's dividend growth rate is greater than the required rate of return, we cannot use dividend valuation models to calculate the stock value.
C. We have other alternatives to valuate stock price.
D. All of the above.
Homework Answers
According to dividend valuation model, Current price= dividend/(required return-growth)
So when dividend is zero then the current price will also be zero.
There are various models to calculate the price of stock..
We can calculate the stock value even when growth rate is more than the required return.
So correct answer is D) All of the above
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