Stocks a and B Have the Following Data A) the Two Stocks Should Have the Same Expected Dividend

question 82

Multiple Choice

Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? $\begin{array}{lrr}& \underline{\text { A }} &\underline{\text {B}}\\ \text { Price } & \$ 25 & \$ 40 \\\text { Expected growth } & 7 \% & 9 \% \\\text { Expected return } & 10 \% & 12 \%\end{array}$

• A) The two stocks should have the same expected dividend.
• B) The two stocks could not be in equilibrium with the numbers given in the question.
• C) A's expected dividend is $0.50.
• D) B's expected dividend is $0.75.
• E) A's expected dividend is $0.75 and B's expected dividend is $1.20.

---

Definitions:

Invoice

The bill that the seller sends to the buyer.

Gross Profit

The financial metric that indicates the difference between revenue and the cost of goods sold (COGS), revealing how much a company earns from its core business activities.

Selling Expenses

Costs incurred directly in the selling of goods and services, such as salaries of sales staff, advertising, and store display.

Cost of Merchandise Sold

The total expense incurred to purchase or produce the goods that have been sold during a particular period.