# finance (assumptions)

posted by
**Jason** on
.

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???