QUESTION 3 Charlotte Grace\'s Interior Design Corp. has the following data. Assu

Question

QUESTION 3 Charlotte Grace's Interior Design Corp. has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D Current Price, Po $3.00 $50 6.0% Expected constant growth rate a. The stock's required return is 10% b. The stock's expected dividend yield and growth rate are equal C. The stock's expected dividend yield is 5% a. The stock's expected capital gains yield is 5% e. The stock's expected price 10 years from now is $100.00.

Explanation / Answer

Hence, correct option is (b)

Required rate of return ( r) D1÷P0+g Here, Stock price (P0) $                               50.00 Expected dividend (D1) $                                 3.00 Growth rate (g) 6.00% Required rate of return ( r) 12.00% $1.41/$9.98+4.20%

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