Which of the Following Is True for a Firm Having

question 36

Multiple Choice

Which of the following is true for a firm having a stock price of $42,an expected dividend of $3,and a sustainable growth rate of 8%?

• A) It has a required return of 15.14%.
• B) It has a dividend yield of 7.35%.
• C) The stock price is expected to be $45 next year.
• D) It has a capital appreciation rate of 7.14%.

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Definitions:

Capital Lease

A lease agreement that is treated like an asset purchase for accounting purposes, where the lessee obtains the benefits and risks of ownership.

Bargain Purchase Option

An option in a lease agreement that allows the lessee to purchase the leased item at a price significantly lower than its expected fair market value.

Economic Life

The expected period of time during which an asset is useful to the average owner, or until the asset can no longer be economically used.

Lease Term

The fixed, non-cancelable duration of a lease agreement, often including options to renew for additional periods.