A Stock Currently Sells for $25 Per Share and Pays

question 7

Multiple Choice

A stock currently sells for $25 per share and pays $0.24 per year in dividends.What is an investor's valuation of this stock if she expects it to be selling for $30 in one year and requires a 15 percent return on equity investments?

• A) $30.24
• B) $26.30
• C) $26.09
• D) $27.74

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a business, including materials, labor, and manufacturing overhead.

Manufacturing Company

A business engaged in the production of goods using labor, machinery, and raw materials.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and are an essential component in its production.

Factory Overhead

All indirect costs associated with manufacturing, such as maintenance, utilities, and quality control, not directly tied to the production of specific goods.