Later on Today,you Will Receive an Annual Dividend of $2

question 53

Multiple Choice

Later on today,you will receive an annual dividend of $2.50 a share on ABC stock.The dividend is expected to increase by 2 percent annually thereafter.Which formula should be used to compute the value of the stock today if the discount rate is 14 percent?

• A)$2.50 + $2.50 / 0.14
• B)($2.50 × 1.02)/ (0.14 - 0.02)
• C)($2.50 × 1.02)/ 0.14
• D)$2.50 + ($2.50 × 1.02)/ (0.14 - 0.02)
• E)$2.50 + ($2.50 × 1.02)/ 0.14

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