Cache Creek Manufacturing Company Is Expected to Pay a Dividend

question 73

Multiple Choice

Cache Creek Manufacturing Company is expected to pay a dividend of $3.36 in the upcoming year. Dividends are expected to grow at 8% per year. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. Investors use the CAPM to compute the market capitalization rate and use the constant-growth DDM to determine the value of the stock. The stock's current price is $84. Using the constant-growth DDM, the market capitalization rate is ________.

• A) 9%
• B) 12%
• C) 14%
• D) 18%

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A combustible black or brownish-black sedimentary rock used primarily as a fuel in electricity generation.

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Energy released during nuclear fission or fusion, especially when used to generate electricity.

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A form of energy resulting from the existence of charged particles such as electrons or protons, characterized by its ability to perform work, such as powering electrical devices.