Stocks a and B Have the Following Data

question 34

Multiple Choice

Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

• A) Stock A's expected dividend at t = 1 is only half that of Stock B.
• B) Stock A has a higher dividend yield than Stock B.
• C) Currently the two stocks have the same price, but over time Stock B's price will pass that of A.
• D) Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.
• E) The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.

Grasp the significance of comparing financial metrics (e.g., return on assets vs. return on equity) and what these comparisons reveal about financial strategies and performance.

Understand the concept and significance of the relevant range of operations.

Differentiate between fixed, variable, and mixed costs in relation to production volume.

Grasp the mechanics and implications of cost behavior on per unit and total cost basis.

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Definitions:

Paternalism

A behavior by an authority that limits someone's freedom or responsibilities for their own good, often without their consent.

Ethical Principle

Fundamental guidelines that inform ethical decision-making and behavior, emphasizing values like honesty, fairness, and respect.

Self-determination

The process by which a person controls their own life, making choices and decisions based on their values, preferences, and aspirations.

Dilemma

A situation in which a difficult choice must be made between two or more alternatives, often involving equally undesirable outcomes.