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    Stock Price

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    A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = -5%). If the company's expected and required rate of return is 15%, which of the following statements is CORRECT?

    a. The company's current stock price is $20.
    b. The company's dividend yield 5 years from now is expected to be 10%.
    c. The constant growth model cannot be used because the growth rate is negative.
    d. The company's expected capital gains yield is 5%.
    e. The company's stock price next year is expected to be $9.50.

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    Please see the attached file:

    A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00.  The dividend is expected to decline at a rate of 5% a year forever (g = -5%).  If the company's expected and required rate of return is 15%, which of the following statements is CORRECT?

    a. The company's current stock price is $20.
    b. The company's dividend yield 5 years from now is ...

    Solution Summary

    MCQ on stock price answered.

    $2.19

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