5. Using the constant dividend growth model to value a stock assumes which of the following?

The dividend will grow at a constant rate forever

The required rate of return will never vary from the current rate

The dividend will remain the same throughout the life of the company

The growth rate is greater than the required return

Both a & b are correct statements

The Johnson Company has just paid a dividend of $8.00 per share (i.e. D0 = $8.00) on its common stock, and it expects this dividend to grow by 13 percent per year, indefinitely. The required rate of return on the Jackson Company stock is 16%. How much should an investor be willing to pay for this stock today?

	$ 56.50
	$266.67
	$301.33
	$ 69.54
	$148.25