Q848
In expected rate of return for constant growth, an expected yield on capital must be
A.
equal to zero
B.
greater than expected growth rate
C.
less than expected growth rate
D.
equal to expected growth rate
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
In expected rate of return for constant growth, an expected yield on capital must be equal to expected growth rate. Growth rates typically represent the compounded annualized rate of growth of a company's revenues, earnings, dividends or even macro concepts, such as gross domestic product (GDP) and retail sales. Expected forward-looking or trailing growth rates are two common kinds of growth rates used for analysis.