A Stock Recently Paid a Dividend of $3 Per Share

question 113

Multiple Choice

A stock recently paid a dividend of $3 per share. Its growth rate is expected to be 8 percent. Investors require a 10 percent return. The stock is selling in the market for $140. What is this stock worth and is the stock undervalued or overvalued?

• A) $162; undervalued
• B) $162; overvalued
• C) $150; undervalued
• D) $150; overvalued

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Definitions:

Ordering

The process of requesting goods, services, or tasks in a systematic and organized manner.

Contamination

The presence of unwanted substances or impurities in a material or environment, often leading to pollution or infection.

Floor

The bottom surface of any room or vehicle, on which one may walk or stand.

Service Contract

A contract that covers services for equipment that are not included in a standard maintenance contract.