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If the Model Below Is to Give a "Reasonable" Valuation

Question 102

Multiple Choice

If the model below is to give a "reasonable" valuation of a stock, which of the following is not a valid assumption for the model? If the model below is to give a reasonable valuation of a stock, which of the following is not a valid assumption for the model? A) Growth, g, is negative. B) There will be no growth, i.e., g is zero. C) The growth rate exceeds the required rate of return. D) The required return is exceptionally high (r<sub>s</sub> > 30%) . E) All of the above are workable assumptions and are valid in the sense that the model can be used even if they hold true.


A) Growth, g, is negative.
B) There will be no growth, i.e., g is zero.
C) The growth rate exceeds the required rate of return.
D) The required return is exceptionally high (rs > 30%) .
E) All of the above are workable assumptions and are valid in the sense that the model can be used even if they hold true.

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