Fris B Corporation Stock Is Currently Selling for $42

question 54

Multiple Choice

Fris B. Corporation stock is currently selling for $42.86. It is expected to pay a dividend of $3.00 at the end of the year. Dividends are expected to grow at a constant rate of 3% indefinitely. Compute the required rate of return on FBC stock.

• A) 10%
• B) 33%
• C) 7%
• D) 4.3%

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Definitions:

Carrying Capacity

The maximum population size of a species that an environment can sustain indefinitely, given the food, habitat, water, and other resources available.

Exponential Growth

A process of increase where the quantity grows at a rate proportional to its current value, resulting in a rapid rise over time.

Semelparous

Having a single reproductive effort in a lifetime.

Iteroparous

Having repeated reproductive cycles throughout a lifetime. Compare with semelparous.