Dominion Tool Company Is Expected to Pay a Dividend of $2

question 61

Multiple Choice

Dominion Tool Company is expected to pay a dividend of $2 in the upcoming year.The risk-free rate of return is 4% and the expected return on the market portfolio is 14%.Analysts expect the price of Dominion Tool Company shares to be $22 a year from now.The beta of Dominion Tool Company's stock is 1.25.The market's required rate of return on Dominion's stock is ____.

• A) 14.0%
• B) 17.5%
• C) 16.5%
• D) 15.25%
• E) none of these

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Definitions:

Board of Directors

A group of individuals elected by shareholders to oversee the activities and governance of a corporation, ensuring it's run properly and profitably.

Corporate Level

The corporate level refers to the highest level of organizational strategy and decision making, often pertaining to the entire enterprise rather than specific divisions or products.

Board of Directors

A group of elected or appointed members who oversee the activities and governance of a company or organization.

Strategy

A plan of action designed to achieve a long-term or overall goal.