What Should Be the Current Price of a Share of Stock

question 126

Multiple Choice

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20 percent, and a constant dividend growth rate of 6 percent?

• A)$19.23
• B)$25.00
• C)$35.71
• D)$37.86

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenues and expenses to the period in which they actually occurred.

Office Supplies

Items used in an office for daily work such as pens, paper, staplers, and calculators.

Physical Count

A manual counting process of inventory or other assets on hand to verify quantities or conditions at a specific point in time.

Straight-Line Depreciation

A method of depreciating an asset evenly over its useful life, resulting in equal annual depreciation expenses.