What Constant-Growth Rate in Dividends Is Expected for a Stock

question 104

Multiple Choice

What constant-growth rate in dividends is expected for a stock valued at $32.40 if next year's dividend is forecast at $2.20 and the appropriate discount rate is 13.6%?

• A) 7.02%
• B) 6.59%
• C) 6.81%
• D) 7.38%

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Definitions:

Competitive Markets

Markets where many buyers and sellers trade goods and services under conditions of few restrictions, leading to the best prices for both parties.

Opportunity Cost

The advantage lost by selecting one option instead of another.

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Financial awards covering the entire cost of tuition for students, often based on academic merit, need, or other criteria, provided by educational institutions or donors.

Comparative Advantage

The ability of a country or individual to produce a particular good or service at a lower opportunity cost than others, leading to more efficient international trade.