What Is the Required Return for a Stock That Has

question 70

Multiple Choice

What is the required return for a stock that has a 6% constant growth rate, a price of $25, an expected dividend of $2, and a P/E ratio of 10?

• A)5%
• B)10%
• C)14%
• D)22% $25 = 2/(r - .06)

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Definitions:

Homogeneous Oligopoly

A market structure characterized by a few firms producing identical or very similar products, leading to significant inter-firm competition.

Identical Products

Products that are exactly the same in every feature, often used in economic models of perfect competition.

Collusively

Acting in coordination with others, often in secret, to limit competition and manipulate market outcomes, such as setting prices.

Product Demand

The desire and willingness of consumers to purchase a particular good or service at a given price.