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

question 4

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 (g = -5%) . 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.

---

Definitions:

Enter Chart Data

The process of inputting values and information into a chart or graph to visually represent data.

Chart Style

A predefined combination of chart elements, such as color and layout, that can be applied to graphs to make them more visually appealing.

Navigation Pane

A user interface element usually found on the left side of the screen that allows users to locate and manage the contents of a document, website, or application.

Compare Feature

A tool or function in software that enables users to analyze and highlight the differences between two or more items, documents, or datasets.