A Stock Is Expected to Pay a Dividend of $0

question 25

Multiple Choice

A stock is expected to pay a dividend of $0.75 at the end of the year.The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%.What is the stock's current price?

• A) $17.39
• B) $17.84
• C) $18.29
• D) $18.75
• E) $19.22

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Definitions:

Consolidation Method

An accounting technique used for combining the financial statements of subsidiary companies with the parent company.

Statement of Earnings

A financial document that provides an account of a company's revenue, expenses, and profit over a specific period, also known as an income statement.

FVTPL

Fair Value Through Profit or Loss, a classification under IFRS for financial instruments measured at their fair value with changes recognized in the profit or loss.

Significant Influence

The power to participate in the financial and operating policy decisions of another entity without controlling it.