What Should Be the Current Price of a Share of Stock

question 13

Multiple Choice

What should be the current price of a share of stock if a $5 dividend was just paid,the stock has a required return of 20%,and a constant dividend growth rate of 6%?

• A) $19.23
• B) $25.00
• C) $35.71
• D) $37.86

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Definitions:

Correlated

Describes two or more variables when a change in one variable is associated with a change in another, implying a statistical relationship but not causation.

Causally Related

The relationship between two events where one event is understood to be a direct consequence of the other.

Erroneous Generalizations

Unfounded assertions that inaccurately extend conclusions from a sample to an entire population.

Playing with Numbers

Refers to engaging in mathematical calculations or analysis, often in a non-serious or exploratory manner.