A Firm Has Experienced a Constant Annual Rate of Dividend

question 163

Multiple Choice

A firm has experienced a constant annual rate of dividend growth of 9 percent on its common stock and expects the dividend per share in the coming year to be $2.70. The firm can earn 12 percent on similar risk involvements. The value of the firm's common stock is ________.

• A) $22.50/share
• B) $9/share
• C) $90/share
• D) $30/share

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Definitions:

Acid-Test Ratio

A financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.

Financial Data

Numerical information related to monetary transactions, financial status, and performance of a company, used for analysis and decision-making.

Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term liquidity.

Financial Data

Numeric information representing the financial performance, position, and cash flows of a company.