20) A stock currently sells for $30 per share and pays $1.00 per year in dividends. What is an investor's valuation of this stock if he expects it to be selling for $37 in one year and requires a 12 percent return on equity investments? A) $38 B) $34.50 C) $33.93 D) $33.10 21) In the one-period valuation model, a stock's value will be higher A) the lower its dividend is. B) the higher the required return on investments in equity is. C) the higher its expected future price is. D) all of the above. 22) According to the Gordon growth model, what is an investor's valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over a long period of time and the investor's required return is 15 percent? A) $20 C) $11 D) $22 23) Holding other things constant, a stock's value will be highest if the investor's required return on investments in equity is A) 5%. B) 6%. B) $4.40 C) 7%. D) 8%. 24) Holding other things constant, a stock's value will be highest if its dividend growth rate is A) 5%. B) 6%. C) 7%. D) 8%.
20) A stock currently sells for $30 per share and pays $1.00 per year in dividends. What is an investor's valuation of this stock if he expects it to be selling for $37 in one year and requires a 12 percent return on equity investments? A) $38 B) $34.50 C) $33.93 D) $33.10 21) In the one-period valuation model, a stock's value will be higher A) the lower its dividend is. B) the higher the required return on investments in equity is. C) the higher its expected future price is. D) all of the above. 22) According to the Gordon growth model, what is an investor's valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over a long period of time and the investor's required return is 15 percent? A) $20 C) $11 D) $22 23) Holding other things constant, a stock's value will be highest if the investor's required return on investments in equity is A) 5%. B) 6%. B) $4.40 C) 7%. D) 8%. 24) Holding other things constant, a stock's value will be highest if its dividend growth rate is A) 5%. B) 6%. C) 7%. D) 8%.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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