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

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Definitions:

Major Strikes

Significant work stoppages initiated by employees to protest against employment conditions, policies, or decisions.

Collective Bargaining

Collective bargaining is the negotiation process between employers and a group of employees aimed at reaching agreements that regulate working conditions.

Right-to-Work Laws

Legislation that prohibits agreements between labor unions and employers that make membership or payment of union dues a condition of employment.

Labor Unions

Organizations that work to represent the interests of workers in negotiations with employers over issues like wages, hours, and working conditions.