If a Stock's Dividend Is Expected to Grow at a Constant

question 170

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share, and you have an alternative investment of equal risk that will earn a 12 percent rate of return, what would you be willing to pay per share for this stock?

• A)$31.25
• B)$1.40
• C)$1.25
• D)$1.12

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Definitions:

General Ledger

A comprehensive record of all financial transactions made over the life of a company.

Vouchers Payable

Liabilities representing invoices that have been received but not yet paid.

Separation Of Duties

Separation of duties is a key control in internal systems, aimed at reducing the risk of fraud and errors by ensuring that no single individual has control over all aspects of a financial transaction.

Approves Purchases

Refers to the process or authority given to certain individuals or systems to validate and authorize the acquisition of goods or services for a business or organization.