Homework Help: finance (assumptions)

Posted by Jason on Friday, July 25, 2008 at 1:58pm.

The cost of capital for common stock is ke=(d1/Po)+g. What are the assumptions of the model?

A. growth (g) is constant to infinity
B. The price earnings ration stay the same
C. The firm must pay a dividend to use this model
D All of the above are assumptions of the model

I rean in the tex book ... for a constant growth stock, the following conditions must hold:
1. the expected dividend yield is constant
2. the dividend is expected to grow forever at a constant rate.

that means that D is the correct answer, because the company must pay a dividend to make all of these things happen.

Is that correct???

No one has answered this question yet.

Answer this Question

Related Questions

finance (assumptions) - The cost of capital for common stock is ke=(D1/Po)+g. ...
finance - In computing the cost of common equity, if D1 goes downward and Po ...
Finance - The target capital structure for QM Industries is 39% common stock 6% ...
Finance for Buisness - The target capital structure for QM Industries is 42% ...
Finance - The target capital structure for QM Industries is 38% common stock, 5...
finance - The target capital structure for QM industries is 39% common stock, 9...
Finance Management - What is the Weighted Average Cost of Capital (WACC) for a ...
Finance - The Evanec Company’s next expected dividend, D_1, is $3.18; its ...
Finance - Calculating Cost of Equity. The Lo Tech Co. just issued a divident of...
Finance - Byron Corporation's target capital structure consists of 40% debt...

For Further Reading

First Name:
School Subject:
Answer: