Asked by
Emily Calabrese
on Nov 08, 2024
Verified
You have decided you would like to own some shares of the Clean Coal Company but need a 16% rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $1.75 annual dividend per share?
A) $9.19
B) $10.94
C) $12.69
D) $18.60
E) $22.81
Constant Annual Dividend
A fixed dividend amount paid to shareholders every year, without variation.
Rate of Return
Change in an investment's value within a predetermined interval, indicated as a percent of the investment's initial cost.
- Gauge the current value of shares by exploring various dividend growth rates and needed rates of return.
- Acquire knowledge about the concept of the required rate of return and its implications for stock pricing.
Verified Answer
KG
Learning Objectives
- Gauge the current value of shares by exploring various dividend growth rates and needed rates of return.
- Acquire knowledge about the concept of the required rate of return and its implications for stock pricing.