What Should Be the Price for a Common Stock Paying

question 43

Multiple Choice

What should be the price for a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%?

• A) $22.86
• B) $28.00
• C) $42.00
• D) $43.75

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Definitions:

Unilateral Mistake

An error made by one party in a contract that does not necessarily void the contract unless the other party was aware and took advantage of the mistake.

Undue Influence

A situation where an individual is able to influence another person's decisions due to a relationship of trust, leading to unfair outcomes.

Independent Advice

Professional advice offered by a party with no vested interest in the outcome, ensuring unbiased and impartial guidance.

Intent To Deceive

The deliberate intention to mislead or deceive someone, typically to gain a legal or financial advantage.