A Share of Common Stock Has Just Paid a Dividend

question 81

Multiple Choice

A share of common stock has just paid a dividend of $3.00. If the expected long-run growth rate for this stock is 5 percent, and if investors require an 11 percent rate of return, what is the price of the stock?

• A) $50.00
• B) $50.50
• C) $52.50
• D) $53.00

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Definitions:

Critical Value

A point on the scale of a test statistic beyond which we reject the null hypothesis; it depends on the chosen significance level.

Test Statistic

A value calculated from sample data during a hypothesis test.

Null Hypothesis

A hypothesis that states there is no difference or effect, serving as the default assumption to test against in statistical hypothesis testing.

Alternative Hypothesis

A statistical hypothesis that proposes a difference or effect, contrasting the null hypothesis.