How Much Should an Investor Pay Now for a Stock

question 89

Multiple Choice

How much should an investor pay now for a stock expected to sell for $30 one year from now if the stock offers a $2 dividend, dividends are taxed at 40%, capital gains are taxed at 20%, and a 15% after-tax return is expected on the investment?

• A) $25.04
• B) $26.53
• C) $27.09
• D)$27.50

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Definitions:

Labor Supply

Labor supply refers to the total hours that workers are willing and able to work at a given wage rate in an economy.

Short-Run Aggregate-Supply Curve

A graphical representation that shows the relationship between the total production of goods and services and the price level in the short run.

Aggregate Demand

Aggregate requirement for all types of goods and services across an economy at differing levels of prices, during a specified period.

Aggregate Supply

The complete inventory of goods and services that businesses in an economic setting aim to sell during a designated timeframe.