Question: please show how to answer both, thank you! Question 1 1 pts You are evaluating the common stock issued by General Motors. You find the
Question 1 1 pts You are evaluating the common stock issued by General Motors. You find the ROE is 25% with a dividend payout rate of 20%, leading to an internal growth rate of 20%. You require a rate of 8% on General Motors' stock. General Motors is not in a constant growth phase. Azero prowth individend model is probably a better estimate of the value of the common stock Do not buy this stock. It is worth a negative amount Use the constant growth in dividend method to find the value of the stock General Motors appears not to be earning money for its stockholders Question 2 1 pts In the constant growth dividend model for valuing stock and finding expected return on stock, the assumption is that Dividends pald on the stock are zero. Dividends grow at a constant rate forever. Investors are well diversied. the yield to maturity on the bonds are stable The stock is preferred stock where dividends stay the same dollar value forever
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
