Question
In: Economics
According to the Gordon growth model, which of the following can cause the value of a...
According to the Gordon growth model, which of the following can cause the value of a stock to increase?
Select one:
increased required return on equity
increased idiosyncratic risk
lower expected growth rate of dividends
lower interest rate on 3-month Treasury bill
Solutions
Expert Solution
lower interest rate on 3-month Treasury bill
because it will reduce the cost of capital which is positive for stock
Rahul Sunny answered 2 years agoRelated Solutions
According to the Gordon growth model, which of the following can cause the value of a...
According to the Gordon growth model, which of the following can
cause the value of a stock to increase? Select one:
A. lower expected growth rate of dividends B. increased
idiosyncratic risk C. lower risk-free interest rates D. increased
required return on equity
5. According to the Gordon Growth model, stocks can be valued solely based on their dividend...
5. According to the Gordon Growth model, stocks can be valued
solely based on their dividend payments, the expected growth rate
of those dividends, and the required rate of return.
a. How come we needn’t include the future sale price of the
stock in the valuation?
b. Some stocks have not paid dividends for many years and have
no announced plan to pay dividends in the near future. How can
these stocks still have value?
Discuss the how we can use the Dividend (Gordon) Growth model to indicate the intrinsic value...
Discuss the how we can use the Dividend (Gordon) Growth model to
indicate the intrinsic value of company shares. Be sure to provide
as part of this discussion certain assumptions we can make
regarding growth and the required rate of return to be used in this
analysis and limitations of utilizing this model for valuation
purposes.
Discuss the how we can use the Dividend (Gordon) Growth model to indicate the intrinsic value...
Discuss the how we can use the Dividend (Gordon) Growth model to
indicate the intrinsic value of company shares. Be sure to provide
as part of this discussion certain assumptions we can make
regarding growth and the required rate of return to be used in this
analysis and limitations of utilizing this model for valuation
purposes.
Assume that you are using the dividend discount model (the Gordon Growth Model) to value stock....
Assume that you are using the dividend discount model (the
Gordon Growth Model) to value stock. The stock currently pays no
dividends, but expected to begin paying dividends in five years.
The firm's cost of equity is 11%. Compute the value of a stock
paying no dividends today, but that is expected to pay annual
dividends of $4 in five years and the stock is expected to grow at
a rate of 9% for the next six years that it...
Common stock valuelong dash—Constant growth Use the constant-growth model (Gordon model) to find the value of...
Common stock
valuelong dash—Constant growth Use the constant-growth model
(Gordon model) to find the value of each firm shown in the
following table: (Click on the icon located on the top-right
corner of the data table below in order to copy its contents into
a spreadsheet.)
Firm
Dividend expected next year
Dividend growth rate
Required return
A
$1.201.20
8.08.0%
13.013.0%
B
4.004.00
5.05.0
15.015.0
C
0.650.65
10.010.0
14.014.0
D
6.006.00
8.08.0
9.09.0
E
2.252.25
8.08.0
20.020.0
Provide the issues or disadvantages of a dividend discount model (Gordon Growth Model) for equity and...
Provide the issues or disadvantages of a dividend discount model
(Gordon Growth Model) for equity and give a detailed quantitative
example and interpretation. Use the following to calculate,
D0=$2.20, g=5%, Beta 1.2, Rf=3%
How is the constant growth dividend model, also known as the “Gordon Model,” useful for estimating...
How is the constant growth dividend model, also known as the
“Gordon Model,” useful for estimating the price of equity or
determining the cost of equity. When is the model appropriate to
use? This model is used frequently by financial analysts, even
though no firm has perfectly constant growth. Why do you think this
is? Discuss two ways in which the growth rate may be determined.
How might one gauge the stability of a growth rate determined using
these methods?...
Use the Solow growth model to demonstrate how differences inpopulation growth rates can cause highly-developed...
Use the Solow growth model to demonstrate how differences in
population growth rates can cause highly-developed countries and
lesser-developed countries to both grow at low rates and never
converge. Include in your answer a description of the differences
in population growth rates and illustrations of the consequences
for long-run capital stock per worker, long- run output per worker,
and the time paths of output per worker from the short-run to the
long-run.
Part 1: Consider the Gordon model of constant growth rate assumption. State briefly what this model...
Part 1: Consider the Gordon model of constant growth
rate assumption. State briefly what this model says about the value
of stocks. In 2018, Walmart paid $2.08 in dividends per share. The
stock traded for about $96 per share towards the end of the year.
Find out a set of inputs to the Gordon growth model (e.g., the
assumed growth rate g and the required rate of return
r, that make the intrinsic value of the stock equal to the...
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