Merrell Enterprises' Stock Has an Expected Return of 14

question 22

Multiple Choice

Merrell Enterprises' stock has an expected return of 14%. The stock's dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share. Which of the following statements is CORRECT?

• A) the stock's dividend yield is 8%.
• B) the current dividend per share is $4.00.
• C) the stock price is expected to be $54 a share one year from now.
• D) the stock price is expected to be $57 a share one year from now.
• E) the stock's dividend yield is 7%.

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Definitions:

Null Hypothesis

The null hypothesis is a statement that there is no effect or no difference, and it serves as the assumption to be tested in statistical analyses.

T-test

A statistical method employed to assess if there's a significant difference between the average values of two distinct groups.

Critical Value

A point on the test distribution that is compared with the test statistic to determine whether to reject the null hypothesis.

Alpha

The level of significance in statistical testing, representing the probability of rejecting the null hypothesis when it is actually true.