What Should Be the Stock Value One Year from Today

question 17

Multiple Choice

What should be the stock value one year from today for a stock that currently sells for $35, has a required return of 15 percent, an expected dividend of $2.80, and a constant dividend growth rate of 7 percent?

• A)$37.45
• B)$37.80
• C)$40.25
• D)$43.05

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Definitions:

Prior Probabilities

The probabilities that are assigned to events or hypotheses before any relevant evidence is taken into account.

Payoff Table

A decision-making tool that outlines the possible outcomes and their respective returns or losses for different actions or decisions under consideration.

Sample Information

Data or facts obtained from a subset of a larger population, used for the purpose of statistical analysis or estimation of parameters of the entire population.

Expected Monetary Value

A statistical technique used in decision-making to calculate the average outcome when the future includes scenarios that may or may not happen.