KDP's Most Recent Dividend Was $2

question 57

Multiple Choice

KDP's most recent dividend was $2.00 per share and is selling today in the market for $70. The dividend is expected to grow at a rate of 7% per year for the foreseeable future. If the market return is 10% on investments with comparable risk, should you purchase the stock?

• A) No, because the stock is overpriced $1.33.
• B) No, because the stock is overpriced $3.33.
• C) Yes, because the stock is underpriced $1.33.
• D) Yes, because the stock is underpriced $3.33.

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Definitions:

Chief Executive Officer

The highest-ranking executive in a company, responsible for making major corporate decisions and managing the overall operations and resources.

Certify

To officially recognize, attest or confirm something as true, accurate, or meeting certain standards, often through a formal statement or document.

SEC Rule 10b-5

A regulation enacted by the U.S. Securities and Exchange Commission to prevent fraud, misrepresentation, and insider trading in the securities market.

Corporate Insider

A person within an organization, typically an executive or employee, who has access to confidential or non-public information.