Suppose That You Have Just Purchased a Share of Stock

question 116

Multiple Choice

Suppose that you have just purchased a share of stock for $22.51. The most recent dividend was $1.50 and dividends are expected to grow at a rate of 5% indefinitely. What must your required
Return be on the stock?

• A) 5.00%
• B) 7.00%
• C) 10.25%
• D) 12.00%
• E) 13.67%

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Definitions:

Price-Earnings Ratio

A valuation metric for stocks, calculated by dividing the current market price of the stock by its earnings per share.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue. It is often referred to as the "bottom line".

Dividends

Payments made by a corporation to its shareholder members, distributing a portion of its earnings.

Analytical Measures

Quantitative tools and methods used to assess financial data, performance metrics, or market trends to support decision-making processes.