Merrell Enterprises' Stock Has an Expected Return of 14

question 17

Multiple Choice

Merrell Enterprises' stock has an expected return of 14%.The stock's dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share.Which of the following statements is CORRECT?

• A) The stock's dividend yield is 8%.
• B) The current dividend per share is $4.00.
• C) The stock price is expected to be $54 a share one year from now.
• D) The stock price is expected to be $57 a share one year from now.
• E) The stock's dividend yield is 7%.

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Definitions:

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Compounded Semiannually

Interest calculation method where interest is added to the principal on a semiannual basis, leading to interest on interest in the second half of the year.

Quarterly Compounded

Interest calculation method where the accrued interest is added to the principal balance four times a year, allowing interest to be earned on interest.

Annual Rate of Return

The percentage of profit or loss on an investment over a one-year period.