Suppose 3M pays a dividend of $2 per share which the investor is expected to receive immediately. The dividend is expected to grow by 5% per year and the investor has a required rate of return of 8%
What should be the current price of the stock according to the Gordon-Growth model?
The stock price should equal $2 × [(1.05/.08-.05 ) = $70.
You might also like to view...
If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters
Indicate whether the statement is true or false
Noise pollution is a serious problem. One major contributor is the recent development of very powerful amplification equipment for automobile radios. Many people complain that the windows in their home vibrate when some cars drive by. Others complain that loud car radios set off very sensitive alarms in nearby parked cars. What do we know about the drivers of cars with loud stereos?
a. b, c, and e. b. It would be very expensive for them to engage in this behavior if individuals had a right to a nonvibrating home. c. The cost of their own hearing loss is less than the benefit they receive from cranking it up. d. They realize that there are no ordinances prohibiting loud noise. e. Their private costs fall short of the social costs.
Coca-Cola bottlers increased their prices as the price of sugar (an important ingredient in producing Coke) rose sharply in the late 1980s. Under these circumstances, the increase in the price of Coke occurs as a result of a(n): a. decrease in supply. b. decrease in demand. c. increase in supply
d. increase in demand.
Each person is always better off choosing not to pay for a public good because of the free rider problem
a. True b. False Indicate whether the statement is true or false