1) An issue of common stock has just paid a dividend of $3.75. Its growth rate is 8%. What is its price if the market's rate of return is 16?

a. 25.01
b. 46.88
c. 50.63
d. none of the above

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COST OF EQUITY ke = D1/P0 + g
16% =3.75/P0 + 8%
P0 = 3.75/(16% - 8%)
Pric of equity = $ 46.88