Cache Creek Manufacturing Company Is Expected to Pay a Dividend

question 53

Multiple Choice

Cache Creek Manufacturing Company is expected to pay a dividend of $4.20 in the upcoming year.Dividends are expected to grow at the rate of 8% per year.The riskfree rate of return is 4% and the expected return on the market portfolio is 14%.Investors use the CAPM to compute the market capitalization rate on the stock,and the constant growth DDM to determine the intrinsic value of the stock.The stock is trading in the market today at $84.00.Using the constant growth DDM and the CAPM,the beta of the stock is _________.

• A) 1.4
• B) 0.9
• C) 0.8
• D) 0.5

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Definitions:

Industrial Revolution

The Industrial Revolution was a period of major industrialization and technological innovation that began in the late 18th century, leading to significant changes in society and the economy.

Population Boom

Population Boom refers to a rapid increase in the population of a particular area, often as a result of advancements in healthcare and living conditions, leading to challenges in resources and infrastructure.

Infant Mortality

Average number of infant deaths per 1,000 live births in a particular population.

Capitalism

An economic system based on the laws of free market competition, privatization of the means of production, and production for profit.