MJ Enterprises Stock Traditionally Provides an Average Rate of Return

question 71

Multiple Choice

MJ Enterprises stock traditionally provides an average rate of return of 11.6 percent.The firm's next annual dividend is projected at $2.40 with future increases of 3 percent per year.What price should you pay for this stock if you are satisfied with the firm's average rate of return?

• A)$28.74
• B)$22.50
• C)$27.91
• D)$28.89
• E)$21.31

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Definitions:

Money Supply

The total capital available in an economy at a given moment, which includes cash, coins, and the money held in checking and savings accounts.

Value of Money

The purchasing power of money, indicating how much goods or services one unit of money can buy.

Excess Supply

A market situation where the quantity of a good or service supplied is greater than the quantity demanded at the current price.

Deflation

Deflation is a decrease in the general price level of goods and services in an economy over a period, indicating negative inflation.