What Is the Required Return for a Stock That Has

question 88

Multiple Choice

What is the required return for a stock that has a 6% constant-growth rate,a price of $25,an expected dividend of $2,and a P/E ratio of 10?

• A) 5%
• B) 10%
• C) 14%
• D) 22%

---

Definitions:

Differentiated Products

Goods or services that are distinguished from each other by specific features, branding, or quality, making them non-perfect substitutes in the eyes of consumers.

Competitive Market

A market structure characterized by a large number of buyers and sellers, wherein no single entity has significant power to dictate market conditions.

Free Entry

is a market condition where any business can enter the industry without facing significant barriers, promoting competition.

Equilibrium Price

The price at which the quantity of goods supplied equals the quantity demanded.