Stocks a and B Have the Same Required Return and the Same

question 66

Multiple Choice

Stocks A and B have the same required return and the same price, $25. Stock A's dividend is expected to grow at a constant rate of 10% per year, while Stock B's dividend is expected to grow at a constant rate of 5% per year. Which of the following statements is correct?

• A) Stock A's expected dividend at t = 1 is only half that of Stock B.
• B) Stock A has a higher dividend yield than Stock B.
• C) Currently the two stocks have the same price, but over time Stock B's price passes that of A.
• D) Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.

Recognize the role of criminal law in addressing harm to public health, safety, or morals.

Learn about the distinctions between larceny and embezzlement.

Understand the legal frameworks for combating bribery and corruption, especially in international contexts.

Recognize the legal consequences of non-compliance with regulatory statutes.

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Definitions:

Salvage Value

The estimated monetary value of an asset at the cessation of its useful duration.

Labor Costs

Expenses related to compensating employees for their work, including wages, salaries, and benefits.

Payback Period

The time it takes for an investment to generate cash flows sufficient to recover the initial cost of the investment.

Simple Rate of Return

Is the ratio of net annual cost savings to the initial investment, used to evaluate investment efficiency.