A Stock Just Paid an Annual Dividend of $0

question 44

Multiple Choice

A stock just paid an annual dividend of $0.80 a share, and the dividend is expected to grow at 8 percent for 2 years and 3 percent thereafter. The required return is 9 percent. What is the stock price?

• A) $15.36
• B) $15.64
• C) $15.97
• D) $15.06
• E) $15.21

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Definitions:

Cost of Goods Sold

Costs directly connected to the assembly of products sold by a business, covering materials and labor expenses.

Operating Income

The profit realized from a business's core business operations, excluding deductions of interest and tax.

Operating Expenses

Costs associated with running the day-to-day operations of a business which are necessary to keep the business functioning, excluding the cost of goods sold.

Gross Profit

The distinction between the income from sales and the expense of goods sold prior to subtracting costs for overheads, wages, taxes, and interest.