Expected Return American Eagle Outfitters (AEO) Recently Paid a $0

question 85

Multiple Choice

Expected Return American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is the return shareholders are expecting?

• A) 15.50%
• B) 15.52%
• C) 17.08%
• D) 17.32%

---

Definitions:

Normal Profit

The minimum level of profit necessary for a company to remain competitive in the market, often considered the break-even point.

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one more unit of a good or service. It is a critical concept in economics for decision-making regarding production levels.

Purely Competitive Market

A market structure characterized by many buyers and sellers, all of whom are selling a homogeneous product, with no single buyer or seller able to influence the market price.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing excess return over perfect competition.