The Common Stock of Grunskies Ltd Currently Sells for $48

question 50

Multiple Choice

The common stock of Grunskies Ltd currently sells for $48 per share.The firm has a constant dividend growth rate of 6 percent.If the required rate of return is 15 percent,what is the expected dividend yield on the stock?

• A)6.0%.
• B)8.5%.
• C)9.0%.
• D)15.0%.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is available to cover fixed costs and generate profit.

Variable Costs

These are expenses that vary directly with the level of production or sales volume; they rise as production increases and fall as production decreases.

Contribution Margin Ratio

The percentage of sales revenue that remains after deducting variable costs, used to cover fixed costs and generate profit.

Variable Cost

Costs that change in proportion to the level of goods or services produced by a business.