What Is the Current Value of the Common Stock of Clump

question 74

Multiple Choice

What is the current value of the common stock of Clump Dump Kitty Litter, Ltd., if you know the current dividend yield is 6.14%, the PE is 16, and the annual dividend is $1.35?

• A) $21.60
• B) $21.99
• C) $8.29
• D) $98.24

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Definitions:

Debt/Equity Ratio

The ratio that highlights the proportional use of debt and shareholders' equity in asset financing for a company.

Stripped Common Shares

Common stock on which dividends and capital gains are repackaged and sold separately.

Dividends

Payments made by a corporation to its shareholders, usually derived from the company's profits, as a reward for investing in the company's equity.

Capital Gains

Capital Gains are the profits realized from the sale of assets such as stocks, bonds, or real estate, which exceed the purchase costs.