The Expected Rate of Return on a Share of Common

question 65

Multiple Choice

The expected rate of return on a share of common stock whose dividends are growing at a constant rate (g) is which of the following,where D₁ is the next dividend and Vc is the current value of the stock?

• A)(D₁ + g)/Vc
• B)D₁/Vc + g
• C)D₁/g
• D)D₁/g + Vc

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Definitions:

Nondisclosure Agreement

A legal contract between two or more parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes but wish to restrict access to or by third parties.

Disaffirm

The legal act of denying, rejecting, or invalidating a contract or agreement.

Fair Market Value

The price at which an asset would sell in a competitive auction setting, reflecting the value agreed upon by a willing buyer and seller.