Stocks X and Y Have the Following Data ?
A) Stock Y Pays a Higher Dividend Per Share

question 72

Multiple Choice

Stocks X and Y have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT? $$\begin{array} { l r r } & \mathrm { X } & \mathrm { Y } \\\text { Price } & \$ 25 & \$ 25 \\\text { Expected dividend yield } & 5 \% & 3 \% \\\text { Required return } & 12 \% & 10 \%\end{array}$$
?

• A) Stock Y pays a higher dividend per share than Stock X.
• B) Stock X pays a higher dividend per share than Stock Y.
• C) One year from now,Stock X should have the higher price.
• D) Stock Y has a lower expected growth rate than Stock X.
• E) Stock Y has the higher expected capital gains yield.

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Definitions:

Depreciation

A method of allocating the cost of a tangible asset over its useful life, reflecting the loss of value over time due to factors like age, wear and tear, or obsolescence.

Environmental Costs

Expenses associated with the negative effects of business practices on the environment, including cleanup costs, fines, and costs for environmentally friendly operations.

Abnormal Spoilage

Waste or loss in production that exceeds the expected level of spoilage under normal operating conditions.

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Pertaining to or owned by an individual or entity not related to the government or public sector.