Choice "C" is correct. An underlying assumption of the constant growth model is the idea that the stock price will grow at the same rate as the dividend, thereby producing a constant growth rate.
Choice "d" is incorrect. Compounding growth is exponential, not linear.
Choice "b" is incorrect. The constant growth model assumes that the growth rate is less than the discount rate.Choice "a" is incorrect. An underlying assumption of the constant growth model is the idea that the stock price will grow at the same rate (not amount) as the dividend as a means of producing a constant growth rate.
