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

question 18

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $3.00 per share,and you have an alternative investment of equal risk that will earn a 9 percent rate of return,what would you be willing to pay per share for this stock?

• A)$9
• B)$20
• C)$45
• D)$106

---

Definitions:

Mental Process

Internal cognitive operations that include thinking, perceiving, remembering, and decision-making.

Subjective Perceptions

Individual interpretations or feelings about experiences, objects, or concepts that are influenced by personal opinions, background, and emotions.

Consciousness

The awareness of oneself, one’s thoughts, feelings, and environment, distinct from but related to collective consciousness in its focus on the individual level of awareness.

Mind

The element of a person that enables them to be aware of the world and their experiences, to think, and to feel.