A Company's Dividend Last Year Was $3

question 77

Multiple Choice

A company's dividend last year was $3.00. Dividends are expected to grow indefinitely at 7 percent, and the required rate of return for the stock is 13 percent. What is the value of the stock today?

• A) $2.83
• B) $23.08
• C) $24.69
• D) $50.00
• E) $53.50

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Definitions:

Annuity

An investment product providing a stable flow of payments, often employed to generate earnings for retired individuals.

Return

Return refers to the gain or loss generated on an investment over a particular period, expressed as a percentage of the investment's initial cost.

Discount Rate

The discount rate is the interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Discount Rate

The discount rate applied to the future cash flows of a financial instrument to determine its current value.