A Stock Recently Paid a Dividend of $3 Per Share

question 113

Multiple Choice

A stock recently paid a dividend of $3 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $140. What is this stock worth and is the stock undervalued or overvalued?

• A) $162; undervalued
• B) $162; overvalued
• C) $150; undervalued
• D) $150; overvalued

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Definitions:

Call Light

A system used in healthcare facilities that allows patients to alert or summon nurses or healthcare staff for assistance.

Penicillin

A group of antibiotics derived from Penicillium fungi, used to treat bacterial infections by inhibiting cell wall synthesis.

Allergic Reaction

An immune system response to a foreign substance (allergen) that is not typically harmful to the body, which can range from mild symptoms to severe anaphylaxis.