The Current Dividend Yield on Clayton's Metals Common Stock Is

question 63

Multiple Choice

The current dividend yield on Clayton's Metals common stock is 3.2 percent.The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year.The dividend growth rate is expected to remain constant at the current level.What is the required rate of return on this stock?

• A)7.25 percent
• B)7.82 percent
• C)8.08 percent
• D)8.39 percent
• E)8.75 percent

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Definitions:

Inelastic

Describes demand or supply that is relatively unresponsive to price changes, meaning quantity demanded or supplied changes little when price changes.

Unitary Elasticity

A situation where a one percent change in the price of a product results in a one percent change in the quantity demanded.

Federal Excise Tax

A tax imposed by the federal government on the sale of specific goods and services, such as gasoline, cigarettes, and alcohol.

Tax Revenue

Income that the government receives from taxation of individuals and businesses.