Cache Creek Manufacturing Company Is Expected to Pay a Dividend

question 88

Multiple Choice

Cache Creek Manufacturing Company is expected to pay a dividend of $4.20 in the upcoming year. Dividends are expected to grow at the rate of 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 on the stock and use the constant-growth DDM to determine the intrinsic value of the stock. The stock is trading in the market today at $84. Using the constant-growth DDM and the CAPM, the beta of the stock is ________.

• A) 1.4
• B) 0.9
• C) 0.8
• D) 0.5

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Definitions:

Internal Body Organs

Organs located within the main cavities of the body, such as the heart, liver, and kidneys, essential for various bodily functions.

Radiologist

A medical doctor specializing in the diagnosis and treatment of disease and injury by interpreting medical imaging techniques.

Nuclide

An atomic species characterized by the specific constitution of its nucleus, including the number of protons and neutrons.

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Energy that travels by waves or particles, particularly electromagnetic radiation such as heat or light.