medium · Principles of Finance

Which of the following would cause the cost of equity calculated by the Gordon growth model to remain constant?

1. An increase in the stock price while the dividend and growth rate remain unchanged.
2. A decrease in the dividend yield that is exactly offset by an increase in the growth rate.
3. An equal percentage increase in both the expected dividend yield and the growth rate.
4. A decrease in the growth rate while the price and dividend remain unchanged.

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