Carl Is Evaluating a Stock That Just Paid a Dividend

question 6

Multiple Choice

Carl is evaluating a stock that just paid a dividend of $2.00 per share. He expects this dividend to grow by 4% per year, and he has determined that 11% is the appropriate required return. What is the most he should pay for the stock?

• A) $18.18
• B) $18.91
• C) $28.57
• D) $29.71

---

Definitions:

Traditional Subsistence Agriculture

Farming practices aimed at self-sufficiency, growing crops and raising livestock primarily for the producer's family consumption, with minimal surplus for trade.

Genetic Research

The scientific study of genes and heredity, focusing on understanding the structure, function, evolution, and mapping of genomes.

Dwarf Varieties

Plant breeds specifically cultivated to be smaller in size, often used in compact gardening spaces or for decorative purposes.