Dividing a Stock's Earnings Per Share by the Expected Rate

question 35

Multiple Choice

Dividing a stock's earnings per share by the expected rate of return will value the share correctly if no new shares are issued and the dividend yield:

• A) exceeds the required return.
• B) equals the required return.
• C) is zero.
• D) is constant.

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Definitions:

Petroleum

A naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons and other organic compounds, used primarily as fuel and in the production of various chemicals.

Crude Oil

A naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials, used as a fuel and raw material in chemical industries.

Opportunity Cost

Surrendering the chance for gains from other choices by opting for one path.

Machinery

Equipment, especially of a mechanical nature, used in the production process of goods.