Cause constant growth stock valuation model to be invalid

Assignment Help Financial Management
Reference no: EM131322885

Which of the following assumptions would cause the constant growth stock valuation model to be invalid? The constant growth model is given below: P0 = [D0(1 + g)]/[(rs - g)] A. a. The growth rate is negative. B. b. The growth rate is zero. C. c. The growth rate is less than the required rate of return. D. d. The required rate of return is above 30 percent. E. e. None of the above assumptions would invalidate the model.

Reference no: EM131322885

Questions Cloud

What will be the goals of counseling : Why did you choose this theory over the others? What will be the goals of counseling and what intervention strategies are used to accomplish those goals? Is the theory designed for short- or long-term counseling? What will be the counselor's role wit..
Tips total return : TIPS Total Return Reconsider a 4.00% TIPS that was issued with CPI reference of 187.4. The bond is purchased at the beginning of the year (after the interest payment), when the CPI was 198.5. For the interest in the middle of the year, the CPI was 19..
See whether performance differed on sunny and cloudy days : A researcher was interested in the effects of weather on cognitive performance.- Using these data, conduct a test to see whether performance differed on sunny and cloudy days.
Best suited to a multinational internet retailer : What type of structure will be best suited to a multinational Internet retailer? Why?How would you recommend building a culture that was inclusive of diverse cultures and accommodates highly creative technical staff?How would you measure the succe..
Cause constant growth stock valuation model to be invalid : Which of the following assumptions would cause the constant growth stock valuation model to be invalid? The constant growth model is given below: P0 = [D0(1 + g)]/[(rs - g)]
What characteristics must an effective counselor possess : Why are counseling theories important to professional counselors? What characteristics must an effective counselor possess? How has psychoanalytic theory influenced professional counseling today
Financial institution and contributed consistently : Judy set up a health savings account (HSA) at her financial institution and contributed consistently for future medical expenses after retirement. Upon eligibility, she had to travel many miles across the country to see a specific dermatologist, b..
How does pipelining improve computer performance : Reduced Instruction Set Computers (RISC) have been around for a while. See what you can find online regarding the proliferation of RISC and where CPU technology is going in the future. You are not limited to the use of RISC in computers because th..
Hard hit by increased competition : The Canning Company has been hard hit by increased competition. Analysts predict that earnings (and dividends) will decline at a rate of 5 percent annually into the foreseeable future. If Canning's last dividend (D0) was $2.00, and investors' require..

Reviews

Write a Review

Financial Management Questions & Answers

  The interest is discounted monthly

Company XYZ purchased some machinery and gave a five-year note with a maturity value of $20,000. The discount rate is 8% annually and the interest is discounted monthly. How much did the company borrow?

  How may managers be able to boost reported earnings

Why may the top managers of a firm be tempted to use misleading estimates of revenues and expenses? How may managers be able to boost the reported earnings of their firm?

  What is the capital intensity ratio at full capacity

The Corner Store has $492,000 of sales and $275,000 of total assets. The firm is operating at 82% of full capacity. What is the capital intensity ratio at full capacity?

  Debt service reserve fund maintained by board of trustees

Huntley Hospital must maintain $3.3 million in a debt service reserve fund maintained by the board of trustees. The board members would like to count this balance when determining the amount of cash that they should carry for meeting normal transacti..

  What are your put options worth and what is your net profit

Suppose you purchase five put contracts on Testaburger Co. The strike price is $79, and the premium is $3.1. If, at expiration, the stock is selling for $63 per share, what are your put options worth? What is your net profit?

  What is the tax rate expected to be in year one

Middlefield Motors is evaluating project A, which would require the purchase of a piece of equipment for 344,000 dollars. During year 1, project A is expected to have relevant revenue of 178,000 dollars, relevant costs of 62,000 dollars, and some dep..

  You are to select one business thatdoes not alreadyhave a

you are to select one business thatdoes not alreadyhave a websiteand develop an internet strategy for it. most large

  The amount borrowed on loan equals

The amount borrowed on a loan equals:

  Two different silicon wafer milling machines-compute the EAC

You are evaluating two different silicon wafer milling machines. The Techron I costs $219,000, has a three-year life, and has pretax operating costs of $56,000 per year. The Techron II costs $385,000, has a five-year life, and has pretax operating co..

  Tamping plant projects required rate of return

ABC Manufacturing Company will invest in a stamping plant in Madison Ohio. The plant requires an initial outlay of $20,000,000. Net cash inflows from the project are expected to be $10,000,000 for the first year, $8,000,000 for year 2, and $5,000,000..

  Current price of the bonds if the present yield to maturity

The Lone Star Company has $1,000 par value bonds outstanding at 9 percent interest. The bonds will mature in 30 years. Compute the current price of the bonds if the present yield to maturity is. a) 7 percent b) 8 percent c)13 percent

  What would be your estimate of equity beta of firm

We want to determine cost of equity for Firm A. We know that Firm A’s target debt-to equity ratio is 2.00. We also know that there is a comparable firm which has exactly same lines of business and therefore is expected to have the same level of busin..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd