A Firm Has a Current Price of $40 a Share

question 90

Multiple Choice

A firm has a current price of $40 a share, an expected growth rate of 11 percent and expected dividend per share (D1) of $2. Given its risk you have a required rate of return for it of 12 percent. Assuming that you expect the stock price to increase to $42 during the investment period, your expected rate of return and decision would be:

• A)10% -do not buy
• B)12%- do not buy
• C)14% -buy
• D)16% - buy
• E)18% - buy

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Definitions:

Ownership of Property

The legal right or title to possess, use, and control an asset or property.

Percentage of Profits

A portion or share of the profits generated by a business or investment, expressed as a percentage of the total profits.

Loan Repayment

The process of paying back borrowed money, typically in installments, to the lender.

Written Partnership Agreement

A legally binding document that outlines the terms, conditions, and operations of a partnership between two or more parties.