What Is the Expected Price for the Stock of a Company

question 16

Multiple Choice

What is the expected price for the stock of a company that just paid a dividend of $3.00? The company has a dividend payout ratio of 50 percent,discount rate of 25 percent,and a P/E of 10.

• A) $60.00
• B) $30.00
• C) $12.00
• D) $45.00
• E) $22.50

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Definitions:

Standard Deviation

An assessment of the range of variation or dispersion present in a set of numeric values, demonstrating how spread out the values are in relation to the average.

Mean

The arithmetic average of a set of values, calculated by summing all the values and then dividing by the total number of values.

DVD Rental Store

A business establishment that offers DVDs for rent to the public, typically involving a physical location where customers can browse and select from available titles.

Standard Error

A statistical measure that quantifies the variability or uncertainty in the sampling distribution of a statistic, often used in estimating margins of error.