Constant Growth: You Are Interested in Investing in a Company

question 81

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 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

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Definitions:

Labor Force

The total number of people who are of working age, capable of working, and actively seeking employment or currently employed.

Employed

The status of having paid work, being engaged in a job or business.

Unemployed

Individuals who are capable of working and actively seeking work but without employment during the period of assessment.

GDP Deflator

is an economic measure of inflation that indicates the level of prices of all new, domestically produced, final goods and services in an economy.