Constant Growth: You Are Interested in Investing in a Company

question 79

Multiple Choice

Constant growth: You are interested in investing in a company that expects to grow steadily at an annual rate of 6 percent for the foreseeable future. The company paid a dividend of $2.30 last year. If your required rate of return is 10 percent, what is the most you would be willing to pay for this share? (Round to the nearest dollar.)

• A) $58
• B) $61
• C) $23
• D) $24

---

Definitions:

Automatic Stabilizers

Economic policies and programs designed to offset fluctuations in a nation's economic activity without direct intervention by policymakers.

Expansionary Fiscal Policy

Government policy aimed at increasing economic activity through higher spending or lower taxes.

Deficit Reduction Packages

Sets of policy measures aimed at reducing government budget deficits through spending cuts, tax increases, or a combination of both.

Budget Act

Legislation outlining how the government will manage its finances, including spending and revenue collection.