Gates Industries' Current Common Stock Dividend (Year 0) Is $2

question 11

Multiple Choice

Gates Industries' current common stock dividend (year 0) is $2.50 per share and is expected to continue growing at a rate of 5% per year for the foreseeable future. Currently the risk-free rate is 7.5% and the estimated market risk premium (i.e., k_m - r_f) is 8.3%. Value Line has estimated Gates Industries' beta to be 1.10. Determine the expected price for Gates Industries, common stock.

• A) $21.50
• B) $15.03
• C) $15.78
• D) $22.57

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Definitions:

Overconfident

Having an excessively high opinion of one's abilities, performance, or situation, often without adequate justification.

Negotiator

A person involved in discussions aimed at reaching an agreement or resolving a conflict between parties.

Principled Negotiation

Principled negotiation is a negotiation strategy that emphasizes mutual interests, fair standards, and objective criteria in the negotiation process, aiming for a win-win outcome for all parties involved.

Objective Standard

A criterion that is not influenced by personal feelings or opinions and can be independently verified.