If a Stock Pays a Constant Annual Dividend Then the Stock

question 4

Multiple Choice

If a stock pays a constant annual dividend then the stock can be valued using the:

• A)fixed coupon bond present value formula.
• B)present value of an annuity due formula.
• C)payout ratio formula.
• D)present value of an ordinary annuity formula.
• E)perpetuity present value formula.

---

Definitions:

Rights Offering

A provision allowing existing shareholders to purchase additional shares at a discount before the stock is offered to the public.

Subscription Price

The fixed price at which shares can be bought as part of a rights issue or initial offering, determined by the issuing company.

Rights Offering

A financial mechanism by which a company offers its existing shareholders the opportunity to purchase additional shares directly, often at a discount.