Posted by **Jason** on Saturday, July 26, 2008 at 4:36am.

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 stays the same

C. the firm must pay a dividend to use this model

D. all of the above are assumptions of the model

The expected rate of return on a growth stock has two constants.

1. the expected divided yield and

2. the growth rate

so A and B are correct and A and B cannot be possible without C, so the answer is D ......Is this correct???

## Answer This Question

## Related Questions

- finance (assumptions) - The cost of capital for common stock is ke=(d1/Po)+g. ...
- fin 3030 - 2. A new common stock issue paid a $1.50 dividend last year. The par ...
- Finance - Byron Corporation's target capital structure consists of 40% debt and...
- finance - 1. A bond has a $1,000 par value (face value) and a contract or coupon...
- Finance - Colgate-Palmolive Company has just paid an annual dividend of $0.85. ...
- Finance - Spam Corp. is financed entirely by common stock and has a beta of 1.0...
- Finance - risk free rate 5.5% market premium 6% beta 0.8 expected dividend $1.00...
- Financial Management - A firm's stock is selling for $85, Dividend yield=5%. A 7...
- Finance - Assume that you are the assistant to the CFO of XYZ Company. Your task...
- Finance - Assume that you are the assistant to the CFO of XYZ Company. Your task...

More Related Questions