A Stock Just Paid a Dividend of D0 = $1

question 39

Multiple Choice

A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?

• A) $23.11
• B) $23.70
• C) $24.31
• D) $24.93
• E) $25.57

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Definitions:

Depreciation

The reduction in value of an asset over time, often due to wear and tear or obsolescence.

Accounting Break-Even

The point at which an organization's revenues exactly cover its expenses, excluding interest and taxes, resulting in neither profit nor loss.

Straight-Line Depreciation

This method of depreciation spreads the cost evenly across the useful life of a fixed asset, resulting in consistent annual charges.

Variable Cost

Financial charges that are tied to the extent of production levels.