Based on the Dividend Growth Model, What Price Should an Investor

question 34

Multiple Choice

Based on the dividend growth model, what price should an investor pay for a share with average annual growth 4 per cent in the future in which the initial dividend is 40p, and the rate of return for the risk class is 10 per cent?

• A) 359p
• B) 597p
• C) 693p
• D) 475p

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Definitions:

Nissl Bodies

Nissl bodies are stacks of rough endoplasmic reticulum found in neurons, essential for the synthesis of neurotransmitter proteins.

Axons

Long, slender projections of nerve cells which conduct electrical impulses away from the neuron's cell body.

Rough Endoplasmic Reticulum

A network of membranous tubules within the cytoplasm of a cell, studded with ribosomes involved in protein synthesis and folding.

Autonomic Nervous System

Controls involuntary physiological functions, including heart rate, blood pressure, digestion, and respiratory rate, operating mostly subconsciously.