Which of the following statements is CORRECT?AnswerThe constant growth model is

Which of the following statements is CORRECT?AnswerThe constant growth model is often appropriate for evaluatingstart-up companies that do not have a stable history of growth butare expected to reach stable growth within the next few years.If a stock has a required rate of return rs = 12% and its dividendis expected to grow at a constant rate of 5% this implies that thestocks dividend yield is also 5%.The stock valuation model P0 = D1/(rs g) can be used tovalue firms whose dividends are expectedto decline at a constant rate i.e. to grow at a negativerate.The price of a stock is the present value of all expected futuredividends discounted at the dividend growth rate.The constant growth model cannot be used for a zero growth stockwhere the dividend is expected to remain constant over time.