Question

If the expected ROE on reinvested earnings is equal to k, the multistage DDM reduces to:_______A. VO= (Market return in year 1)/k. B. VO= (Treasury bond yield in year 1)/k. C. VO= (expected dividend yield in year 1)/k. D. VO= (expected EPS in year 1)/k.

Answer 1

Answer:

VO = ( expected EPS in year 1 )/k ( D )

Explanation:

The multistage DDM reduces to, VO = ( expected EPS in year 1 )/k, The expected ROE on reinvested earnings been equal to K shows that the ROE is constant. since it is constant the value on returned earnings would be zero.

this simply means that EPS = DPS