What Should Be the Current Price of a Share of Stock

question 126

Multiple Choice

What should be the current price of a share of stock if a $5 dividend was just paid, the stock has a required return of 20 percent, and a constant dividend growth rate of 6 percent?

• A)$19.23
• B)$25.00
• C)$35.71
• D)$37.86

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Definitions:

People's Temple

A cult led by Jim Jones, best known for the mass suicide in Jonestown, Guyana, in 1978, where over 900 members died.

Pascal's Wager

An argument in philosophy that posits individuals should live as if God exists, because the potential benefits outweigh the costs.

Atheism

The absence or lack of belief in the existence of deities or gods.

Agnosticism

The belief that the existence or non-existence of deities or other spiritual phenomena is unknown or unknowable.