dividend growth rate as follows: widehat(P), Which of the following statements is (r-gL) true? Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources. Increasing dividends will always increase the stock price. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth. Walter Utilities is a dividend - paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its dividend is expected to grow at a constant rate of 8.00% per year. If Walter's stock currently trades for $22.00 per share, what is the expected rate of return? 8.84% =

dividend growth rate as follows: widehat(P), Which of the following statements is (r-gL) true? Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources. Increasing dividends will always increase the stock price. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth. Walter Utilities is a dividend - paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its dividend is expected to grow at a constant rate of 8.00% per year. If Walter's stock currently trades for $22.00 per share, what is the expected rate of return? 8.84% =

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 14MC

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

Expected returns, dividends, and growth The constant growth valuation formula has dividends
in the numerator. Dividends are divided by the difference between the required return and
D₁
1
Which of the following statements is
(r-gL)
dividend growth rate as follows: widehat(P)
true? Increasing dividends will always decrease the stock price, because the firm is depleting
internal funding resources. Increasing dividends will always increase the stock price. Increasing
dividends may not always increase the stock price, because less earnings may be invested
back into the firm and that impedes growth. Walter Utilities is a dividend - paying company and
is expected to pay an annual dividend of $2.05 at the end of the year. Its dividend is expected
to grow at a constant rate of 8.00% per year. If Walter's stock currently trades for $22.00 per
share, what is the expected rate of return? 8.84%
=

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