Savickas Petroleum's Stock Has a Required Return of 12%,and the Stock

question 56

Multiple Choice

Savickas Petroleum's stock has a required return of 12%,and the stock sells for $40 per share.The firm just paid a dividend of $1.00,and the dividend is expected to grow by 30% per year for the next 4 years,so D₄ = $1.00(1.30) ⁴ = $2.8561.After t = 4,the dividend is expected to grow at a constant rate of X% per year forever.What is the stock's expected constant growth rate after t = 4,i.e.,what is X?

• A)5.17%
• B)5.44%
• C)5.72%
• D)6.02%
• E)6.34%

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Definitions:

Prime Costs

The combined costs of direct materials and direct labor that are directly involved in the production of goods.

Incurred

Refers to costs or expenses that have been realized or experienced by a business as a result of its operations.

Costs

The value of resources spent in the process of producing or providing goods and services.

Cost Formula

A mathematical expression or equation used to calculate the total cost of production, taking into account fixed costs, variable costs, and output levels.