Prock Petroleum's Stock Has a Required Return of 13%,and the Stock

question 66

Multiple Choice

Prock Petroleum's stock has a required return of 13%,and the stock sells for $50 per share.The firm just paid a dividend of $1.00,and the dividend is expected to grow by 30% per year for the next 4 years,so D₄ = $1.00(1.30) ⁴ = $2.8561.After t = 4,the dividend is expected to grow at a constant rate of X% per year forever.What is the stock's expected constant growth rate after t = 4,i.e.,what is X?

• A)7.46%
• B)7.85%
• C)8.26%
• D)8.70%

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