The Common Stock of Tommy's Tools Sells for $27

question 124

Multiple Choice

The common stock of Tommy's Tools sells for $27.50. The firm's beta = 1.2, the risk-free rate is 4%, and the market risk premium is 8%. Next year's dividend is expected to be $1.50. Assuming that dividend growth is expected to remain constant for Tommy's over the foreseeable future, what is the firm's anticipated dividend growth rate?

• A) 7.6%
• B) 7.8%
• C) 8.1%
• D) 9.2%
• E) 10.1%

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