Each of Two Stocks,C and D,are Expected to Pay a Dividend

question 13

Multiple Choice

Each of two stocks,C and D,are expected to pay a dividend of $3 in the upcoming year.The expected growth rate of dividends is 9% for both stocks.You require a rate of return of 10% on stock C and a return of 13% on stock D.The intrinsic value of stock C _____.

• A)will be greater than the intrinsic value of stock D
• B)will be the same as the intrinsic value of stock D
• C)will be less than the intrinsic value of stock D
• D)cannot be calculated without knowing the market rate of return
• E)none of the above is true.

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Definitions:

Fixed Asset Turnover Ratio

A performance metric that evaluates how efficiently a company is using its fixed assets to generate sales.

Net Operating Income

The profit realized from a business's operations after subtracting operating expenses from revenue.

Denominator

The bottom number in a fraction which indicates how many equal parts the whole is divided into.

Intangible Assets

Non-physical assets that have value, such as patents, trademarks, copyrights, and goodwill.