What Is the Expected Constant-Growth Rate of Dividends for a Stock

question 7

Multiple Choice

What is the expected constant-growth rate of dividends for a stock with a current price of $87,an expected dividend payment of $5.40 per share,and a required return of 16%?

• A) 8.48%
• B) 6.25%
• C) 9.79%
• D) 5.23%

---

Definitions:

Purely Competitive

An alternative term for pure competition, describing a market structure with a high degree of competition, including many sellers offering identical products and free market entry and exit.

Minimum AVC

The lowest point on the average variable cost curve, indicating the most efficient scale of production with respect to variable costs.

Total Fixed Costs

The sum of all costs required to produce any level of output that remains unchanged, regardless of the level of production or sales.

Valid Generalization

A conclusion drawn from specific instances that is logically sound and supported by evidence.