Q 78

The Hopkinton Company just paid $2.25 as its annual dividend.The dividends have been increasing at a rate of 5% annually and this trend is expected to continue.The stock is currently selling for $63.60 a share.What is the rate of return on this stock?
A)3.60%
B)3.70%
C)8.7%
D)11.8%

Q 79

ABC Company stock currently has a market value equivalent to its intrinsic value.Marco perceives that ABC Company is increasing its level of risk and therefore Marco increases his required rate of return on ABC stock.This change in the required rate of return
A)will reduce the intrinsic value of ABC stock to Marco.
B)will increase the intrinsic value of ABC stock to Marco.
C)will change the intrinsic value but the direction of the change cannot be determined.
D)is a signal to Marco that he should buy more ABC Company stock.

Q 80

In applying the variable-growth dividend valuation model to a company's stock, analysts frequently define the growth rate, g, as equal to
A)ROE multiplied by the firm's retention rate.
B)ROE divided by the dividend payout ratio.
C)the dividend payout ratio multiplied by the firm's retention rate.
D)P/E multiplied by the dividend payout ratio.