Business, 06.07.2021 20:50, kadenhisgen

The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: P0P0 = = D1rsâˆ’g

Which of the following statements is true?

a. Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources.
b. Increasing dividends will always increase the stock price.
c. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth.

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The constant growth valuation formula has dividends in the numerator. Dividends are divided by the d...