Merrell Enterprises's stock has an expected return of 14% The stock's dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share Which of the following statements is CORRECT?
A) The stock's dividend yield is 8%.
B) The current dividend per share is $4.00.
C) The stock price is expected to be $54 a share one year from now.
D) The stock price is expected to be $57 a share one year from now.
E) The stock's dividend yield is 7%.

Question

Quizplus · Accepted Answer

The stock's dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share. So, the current dividend per share is $50 * 8% = $4.00. The stock's dividend yield is $4.00 / $50 = 8%. The stock price is expected to be $50 * (1 + 8%) = $54 a share one year from now.

Merrell Enterprises's Stock Has an Expected Return of 14% the Stock's