The Dividend Yield on Alpha's Common Stock Is 4

question 85

Multiple Choice

The dividend yield on Alpha's common stock is 4.8%.The company just paid a $2.10 dividend.The rumor is that the dividend will be $2.205 next year.The dividend growth rate is expected to remain constant at the current level.What is the required rate of return on Alpha's stock?

• A)10.04%
• B)16.07%
• C)21.88%
• D)43.75%
• E)45.94%

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Definitions:

Total Current Assets

The sum of all assets likely to be converted into cash within a year, including cash, marketable securities, accounts receivable, and inventory.

Total Current Liabilities

These are obligations that a company is required to pay within one year or within the normal operating cycle.

Working Capital

The variance between a business's immediate assets and its short-term obligations, signalling its ability to meet short-term debts.

Current Ratio

A financial liquidity ratio that compares a company's current assets to its current liabilities.