IBM's Stock Price Is $22, It Is Expected to Pay

question 90

Multiple Choice

IBM's stock price is $22, it is expected to pay a $2 dividend, and analysts expect the firm to grow at 10% per year for the next 5 years. TDI's stock price is $10, it is expected to pay a $1 dividend, and analysts expect the firm to grow at 12% per year for the next 5 years. What is the difference in the two firms' required rate of returns?

• A) 2.91%
• B) 1.82%
• C) 2.03%
• D) 3.23%

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Definitions:

Hydrochloric Acid

A strong acidic solution of hydrogen chloride in water, found in the stomach, where it aids in digestion and sterilization of ingested food.

Lysozymes

Enzymes that damage bacterial cell walls by catalyzing the hydrolysis of 1,4-beta-linkages between N-acetylmuramic acid and N-acetyl-D-glucosamine, found in saliva, mucus, and tears.

Bile Acids

Steroid acids found predominantly in the bile of mammals, crucial for the digestion and absorption of fats and fat-soluble vitamins in the small intestine.

Metabolizing

The complex set of life-sustaining chemical transformations within the cells of living organisms, including processes such as digestion, energy production, and detoxification.