You Are Considering the Purchase of XYZ Company's Common Stock

question 26

Multiple Choice

You are considering the purchase of XYZ Company's common stock which will pay a $1.00 per share dividend one year from the date of purchase. The dividend is expected to grow at the rate of 4% per year. If the appropriate discount rate for this investment is 14%, what is the price of one share of this stock?

• A) $7.14
• B) $10.00
• C) $25.00
• D) Cannot be determined without maturity date