Stock Is Expected to Pay a Year-End Dividend of $2

question 58

Multiple Choice

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

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Definitions:

Chemical Evolution

Chemical evolution refers to the process by which simple chemical compounds present in the Earth's early environment underwent complex interactions leading to the formation of more complex molecules, including the precursors of life.

Metabolic Pathway

Series of linked reactions, beginning with a particular reactant and terminating with an end product.

Aerobic Respiration

A process of producing cellular energy involving oxygen; cells break down food into water and carbon dioxide, releasing energy.

Microbe

A microscopic organism, such as bacteria, viruses, fungi, and protozoa, which can be beneficial or harmful.