You Are Interested in Buying a Share of Stock in CAD

question 15

Multiple Choice

You are interested in buying a share of stock in CAD Corporation. You expect a dividend payment of $0.50 next year and that the dividend will grow by 5% per year thereafter. You desire a 10% return on your purchase. According to the Gordon growth model, what is the maximum price you would pay for a share of this stock?

• A)$10.00
• B)$12.50
• C)$15.00
• D)$20.00

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Definitions:

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