IBM's Stock Price Is $22, It Is Expected to Pay

question 87

Multiple Choice

IBM's stock price is $22, it is expected to pay a $2 dividend, and analysts expect the firm to grow at 10 percent per year for the next five years. TDI's stock price is $10, it is expected to pay a $1 dividend, and analysts expect the firm to grow at 12 percent per year for the next five years. What is the difference in the two firms' required rates of return?

• A) 2.91 percent
• B) 1.82 percent
• C) 2.03 percent
• D) 3.23 percent

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Definitions:

Lipid

Organic compounds including fats, oils, waxes, and sterols, which are important for energy storage, insulating and protecting organs.

Chylomicrons

Lipoprotein particles that transport dietary lipids from the intestines to other locations in the body.

Intestinal Epithelial Cells

Cells that line the interior surface of the intestines, playing roles in nutrient absorption, secretion, and serving as a barrier to pathogens.

Emulsify Fats

The process of breaking down fats into smaller droplets, typically by the action of bile acids, to make them easier to digest.