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

question 265

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of 4 percent in the future and it has just paid a dividend of $6.00 per share,and you have an alternative investment of equal risk that will earn a 7 percent rate of return,what would you be willing to pay per share for this stock?

• A)$6.66
• B)$54.55
• C)$200.00
• D)$208.00

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Definitions:

Fixated

In psychoanalytic theory, a term referring to the inability to progress beyond one of Freud’s psychosexual development stages, resulting in certain personality traits.

Genital Stage

In Freud's psychosexual stages of development, the final stage beginning in puberty where sexual energy is focused on the genitals, and the individual has an interest in mature sexual relationships.

Latency Stage

The latency stage is a phase in Freudian psychosexual development occurring from age six to puberty, characterized by a decrease in sexual urges and interest.

Development

The process of growth, change, and improvement in a particular aspect, such as physical, cognitive, or social development.