A Stock Is Expected to Pay a Year-End Dividend of $2.00

question 4

Multiple Choice

A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = -5%) . If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?

• A) The company's current stock price is $20.
• B) The company's dividend yield 5 years from now is expected to be 10%.
• C) The constant growth model cannot be used because the growth rate is negative.
• D) The company's expected capital gains yield is 5%.
• E) The company's expected stock price at the beginning of next year is $9.50.

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Definitions:

Integration Center

A region in the nervous system where information is processed and interpreted, often resulting in the initiation of a specific response.

Dorsal Root Ganglia

A cluster of nerve cell bodies (neurons) in the dorsal root of a spinal nerve.

Sensory Neurons

Nerve cells that transmit sensory information (sight, sound, feeling, etc.) towards the central nervous system.

ANS Neurons

Autonomic nervous system neurons are specialized cells that control involuntary body functions including heart rate, digestion, and respiratory rate.