# [Solved] You Believe That a Corporation's Dividends Will Grow 5% on Average

## You believe that a corporation's dividends will grow 5% on average into the foreseeable future. If the company's last dividend payment was $5 what should be the current price of the stock assuming a 12% required return?

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- Q18: Using the Gordon growth formula,if D1 is $1.00,ke is 10% or 0.10,and g is 5% or 0.05,then the current stock price is A)$10. B)$20. C)$30. D)$40.
- Q19: Using the Gordon growth model,if D1 is $.50,ke is 7%,and g is 5%,then the present value of the stock is A)$2.50. B)$25. C)$50. D)$46.73.
- Q20: One of the assumptions of the Gordon Growth Model is that dividends will continue growing at ________ rate. A)an increasing B)a fast C)a constant D)an escalating
- Q21: In the Gordon Growth Model,the growth rate is assumed to be ________ the required return on equity. A)greater than B)equal to C)less than D)proportional to
- Q22: A corporation's dividend payment is set by A)its board of directors. B)its debtholders. C)the corporation's CFO (chief financial officer). D)the stockholders themselves.
- Q24: What rights does ownership interest give stockholders?
- Q25: In asset markets,an asset's price is A)set equal to the highest price a seller will accept. B)set equal to the highest price a buyer is willing to pay. C)set equal to the lowest price a seller is willing to accept. D)set by the buyer willing to pay the highest price.
- Q26: Information plays an important role in asset pricing because it allows the buyer to more accurately judge A)liquidity. B)risk. C)capital. D)policy.
- Q27: New information that might lead to a decrease in a stock's price might be A)an expected decrease in the level of future dividends. B)a decrease in the required rate of return. C)an expected increase in the dividend growth rate. D)an expected increase in the future sales price.
- Q28: A change in perceived risk of a stock changes A)the expected dividend growth rate. B)the expected sales price. C)the required rate of return. D)the current dividend.

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