Question $6$

Select the statement that is most correct.

If two, constant growth stocks have the same required rate of return, but where the price of Stock $A$ is greater than the price of Stock B$,$ then Stock A must have a lower dividend yield.

Not only is the market value of a company equal to the expected future free cash flows discounted at the pre$-$tax cost of debt, but the value of the firm will increase as long as the firm's basic earnings power $($BEP$)$ is greater than the cost of the firm's debt.

Markets are said to be weak, semi$-$strong, and strong$-$form efficient if no one, except insiders, is able to earn abnormal returns $($that is$,$ beat the market$)$ on a consistent basis.

If stock prices are in equilibrium, then investing in the stock is the same as investing in a positive NPV project. That is$,$ the expected return on the stock will be greater than the required rate of return on the stock.

To find the current price of a supernormal growth stock, we must value both the dividends during the supernormal period as well as the price at the end of the supernormal period $($equivalent to the value of the remaining dividend stream out to infinity$),$ where both have been discounted to the present.