An Issue of Ordinary Shares Currently Sells for $40

question 110

Multiple Choice

An issue of ordinary shares currently sells for $40.00 per share,has an expected dividend to be paid at the end of the year of $2.00 per share,and has an expected growth rate to infinity of 5% per year.The expected rate of return on this security is

• A)5%.
• B)10.25%.
• C)13.11%.
• D)10%.

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Definitions:

McGregor's Theory X

A management theory that assumes employees are inherently lazy and will avoid work if they can, necessitating control and coercion by management.

Theory Y

Refers to a management style that is optimistic about employees, assuming they find work as natural as play and will be self-directed if the job is satisfying.

Industrial Revolution

A period of major industrialization from the late 18th to early 19th century that transformed mainly agricultural societies into industrialized and urban ones.

Company Towns

Historically, communities where practically all stores and housing are owned by the one company that is also the main employer.