You Are Interested in Investing in a Company That Expects

question 60

Multiple Choice

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 firm 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 stock? (Round to the nearest dollar.)

• A) $58
• B) $61
• C) $23
• D) $24

---

Definitions:

Net Income

The company's net profit, calculated by subtracting all costs and taxes from its total income.

Shares Outstanding

The total number of shares of stock that have been issued by a company and are held by investors, including both public investors and company insiders.

Stock Price

The ongoing rate at which an individual can buy or sell a company's stock in the market.