Suppose DeepMind Inc. will pay $1.50 per share in dividends next year. The require return on the stock is 10% and its dividends will grow by 2% per year indefinitely. Under which of the following scenarios would you be willing to pay more than $18.75 today?A. All else being equal, the required return is more than 10%.B. All else being equal, the dividend next year will be $1.20.C. All else being equal, the growth rate of the dividends is greater than 2%.

C. All else being equal, the growth rate of the dividends is greater than 2%

Explanation:

The formula to calculate the fair price of a stock with a constant growth in dividends is as follows,

So, we will be willing to pay more than 18.75 if the fair price per share today is greater than 18.75. We check all the 3 options.

A. say the required rate is 10.1%

B. P = 1.2 / (0.1 - 0.02) = 15

C. Say the growth rate in dividends is 2.1%

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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