Rancid Fruit Co. just paid a dividend of $1.00 and expects to increase it at a rate
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Question:
Rancid Fruit Co. just paid a dividend of $1.00 and expects to increase it at a rate of 5% annually. All else equal, under which of the following conditions would its stock price fall in one year?
A) If the dividend in one year exceeds $1.05.
B) If the required return falls.
C) If the growth rate increases.
D) If its P/E ratio increases.
E) *If its dividend in one year is less than $1.05
Looking for the process work to understand why the answer is E) If its dividend in one year is less than $1.05
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861704
11th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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