Question: A stock is expected to pay a year -end dividend of $2.00 i.e, D_ =$2.00. The dividend is expected to decline at a rate of
A stock is expected to pay a year -end dividend of $2.00 i.e, D_ =$2.00. The dividend is expected to decline at a rate of 5% a year forever (g = -5%). If the company is in equilibrium and its expected and required of return is 15%, which of the following statements is CORRECT? a. The constant growth model cannot be used because the growth rate is negative. b. The company's expected capital gains yield is 5%. c. The company's dividend yields 5 years from now is expected to be 10%. d. the company's current stock $20. e. The company's expected stock price at the beginning of next year $9.50
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