A Certain Stock Currently Pays a Dividend of $1

question 51

Multiple Choice

A certain stock currently pays a dividend of $1.80 and is selling for $49.50. If the required rate of return on this stock is 14%, what is the implied expected dividend growth rate? Round your
Answer to the nearest tenth of a percent.

• A)9.8%
• B)8.2%
• C)10.4%
• D)none of the above

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Definitions:

Profit Margin

A financial metric that measures the percentage of revenue remaining after all expenses have been deducted from sales.

External Financing Need

The requirement for funds from sources outside the business, such as loans or equity financing, to support operations or growth.

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings distributed to its shareholders in the form of dividends.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales by calculating the percentage of revenue that exceeds the costs of goods sold.