Author Question: The next dividend (Div1) is 1.80, the growth rate (g) is 6, and the required rate of return (r) is ... (Read 145 times)

Deast7027 · **on:** Jul 10, 2018

The next dividend (Div1) is 1.80, the growth rate (g) is 6, and the required rate of return (r) is 12. What is the stock price, according to the constant growth dividend model?

A) 31.80
B) 30.80
C) 30.00
D) 15.00

Question 2

If a firm with credit terms of 2/10 net 30 were to change its terms to 2/10 net 60, the result would
probably be

A) a reduction in safety stock.
B) increased accounts receivable turnover.
C) more customers would take advantage of the cash discount.
D) fewer customers would take advantage of the cash discount.

Mollythedog · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: C
Explanation: C) The Dividend Growth Model states that P0 = .
Inserting our values gives: P0 = = = 30.00.

Answer to Question 2

D