A Common Stock Paid a Dividend at the End of Last

question 16

Multiple Choice

A common stock paid a dividend at the end of last year of $3.50. Dividends have grown at a constant rate of 6 percent per year over the last 20 years,and this constant growth rate is expected to continue into the future. The stock is currently selling at a price of $35 per share. What is the expected rate of return on this stock?

• A)18.7 percent
• B)22.5 percent
• C)16.6 percent
• D)8.4 percent
• E)None of these choices are correct.

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Definitions:

Temporary Accounts

Accounts used to track transactions within a specific accounting period, closed out at the end of the period, such as revenues, expenses, and dividends.

Income Tax Summary Report

A document that aggregates all relevant income tax information for an individual or business for a fiscal period.

Tax Line

A specific line on a tax form where particular income, deduction, or credit information is entered, affecting tax calculations.

Account Balances

The amount of money present in an account at any given moment.