A Stock Is Expected to Pay a Year-End Dividend of $2.00

question 35

Multiple Choice

A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?

• A) The company's current stock price is $20.
• B) The company's dividend yield 5 years from now is expected to be 10%.
• C) The constant growth model cannot be used because the growth rate is negative.
• D) The company's expected capital gains yield is 5%.
• E) The company's expected stock price at the beginning of next year is $9.50.

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Definitions:

Employee Development Strategy

A plan implemented by an organization to improve employee skills, capabilities, and knowledge, aiming to enhance individual and organizational performance.

Cost-effectiveness

A measure of the efficiency of a product, service, or process, in achieving the desired outcome at minimal expense.

Training Technique

Methods or strategies employed in developing individuals' skills and knowledge, aimed at improving performance in their current or future roles.

Career Development Objectives

Goals set by an individual or organization aiming at progress and advancements in professional careers.