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:

Demand Curve

A visual representation that shows the relationship between the price of a product and the quantity of it that consumers are willing and able to purchase at various prices.

Marginal Revenue

The extra revenue generated by the sale of an additional unit of a product or service.

Marginal Cost

The cost of producing one additional unit of a good or service.

Marginal Cost

The expense associated with creating an extra unit of a product or service.