Marianne Walsh Bought XYZ Corporation Stocks for $26 a Share

question 47

Multiple Choice

Marianne Walsh bought XYZ Corporation stocks for $26 a share at the beginning of 2019.At year-end, she received a dividend of $1.75 per share and then sold the stock for $30.50 a share.What was Marianne's annual shareholder return on the investment?

• A)6.25 percent
• B)10.83 percent
• C)17.31 percent
• D)20.49 percent
• E)24.04 percent

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Definitions:

Dual-Class Shares

Sometimes created by a firm to meet special needs and circumstances. Generally, when special classifications of stock are used, one type is designated “Class A,” another as “Class B,” and so on. For example, Class A might be entitled to receive dividends before dividends can be paid on Class B stock. Class B might have the exclusive right to vote.

Voting Control

The power held by a shareholder or group of shareholders who possess a sufficient number of voting shares to influence or direct the management and decisions of a company.

Constant Growth DCF Model

A method of valuing a company using the theory that its stock is worth the sum of all its future cash flows, discounted back to their present value at a constant growth rate.

Perpetual Preferred Stock

A type of preferred stock with no fixed maturity date, where dividends must be paid by the company before dividends are paid to common stockholders.