The Required Return for Williamson Heating's Stock Is 12%, and the Stock

question 78

Multiple Choice

The required return for Williamson Heating's stock is 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:

Amygdala

A region of the brain's temporal lobe involved in experiencing emotions, such as fear and pleasure, and processing emotional memory.

Thalamus

A structure in the brain that relays sensory and motor signals to the cerebral cortex, playing a key role in regulating consciousness, sleep, and alertness.

Hippocampus

A major component of the brain involved in memory formation and spatial navigation, located in the medial temporal lobe.

Cortex

The outer layer of the cerebrum of the brain, involved in complex functions such as thought, memory, and consciousness.