Respuesta :
An increase in the expected dividend growth rate: the following would increase the expected current value of a stock valued using the constant growth model of stock valuation.
What is growth rate?
GDP, turnover, wages, and other values' growth rates indicate how much something has changed over time (month, quarter, year). The percentage is a fairly universal way to communicate it.
An increase in the expected dividend growth rate -
According to constant growth Model,
Value of stock = D × (1 + g) / (r - g)
Where,
D is annual dividend
g is expected dividend growth rate
r is required rate of return
For example:
Suppose stock B grow dividend grow at 1% a year and stock A grow dividend 2% a year. Both stock pay a $1 dividend and have a required rate of return 8%.
Value of stock B = $1 × 1.01/(0.08 - 0.01) = $14.43
Value of stock A = $1 × 1.02/(0.08 - 0.02) = $17
So. Increase in the expected dividend growth rate increase the expected current value of a stock.
Correct option: A
To know more about growth rate refer to:
https://brainly.com/question/24841216
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