The Common Stock of A

question 69

Multiple Choice

The common stock of A.G. Tailor has a required return of 16 percent. The latest press release stated that last year's dividend was $.90 per share and that future dividends will increase by 15 percent for the following 3 years. After that, the dividend growth rate will be 3 percent indefinitely. What is one share of this stock worth to you today?

• A)$8.42
• B)$9.60
• C)$10.26
• D)$10.75
• E)$12.03

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Definitions:

Bona Fide Claim

A claim that is made in good faith without deception or fraud.

Discreetly

Acting in a careful or prudent manner, often to avoid drawing attention or revealing confidential information.

Contingent Liability

A potential obligation that may arise depending on the outcome of a future event.

Recorded

The act of entering financial transactions into the accounting records of a business.