Merrell Enterprises' 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

P1 = P0(1 + g) = $54. Therefore, c is correct. All the other answers are false. P1 = $54.00.

Merrell Enterprises' Stock Has an Expected Return of 14