The Required Return on a Particular Stock Is 13

question 42

Multiple Choice

The required return on a particular stock is 13.5 percent. The stock is priced at $12.95 per share, and dividends are paid annually and are expected to grow at 3 percent per year forever. What is the dividend the stock just paid?

• A) $1.23
• B) $2.37
• C) $1.13
• D) $1.32
• E) $1.09

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Definitions:

Book Value

The net value of a company's assets minus its liabilities, often used to assess a company's financial health.

Dividend Income

Income received from owning shares in a corporation, typically paid out from the company's profits.

Shares Purchased

Refers to the acquisition of ownership units in a corporation, typically through transactions on stock exchanges.

Dividend Declared

A payment announced by a company's board of directors to be distributed among shareholders.