Asked by Jalon Lipford on May 22, 2024
Verified
Transportation stocks currently provide an expected rate of return of 15%. TTT, a large transportation company, will pay a year-end dividend of $3 per share. If the stock is selling at $60 per share, what must be the market's expectation of the constant-growth rate of TTT dividends?
A) 5%
B) 10%
C) 20%
D) none of these options
Expected Rate
The anticipated return on an investment over a specific period, often based on historical data and analysis of market conditions.
Constant-Growth Rate
A growth rate applied continuously and at a constant percentage, often used in the dividend discount model to value stocks.
Dividends
Profits given by a corporation to its shareholders as a distribution.
- Analyze the role of market expectations in stock valuation, including expected growth rates.
Verified Answer
KJ
Learning Objectives
- Analyze the role of market expectations in stock valuation, including expected growth rates.