The common stock of Auto Deliveries sells for $26.21 a share. The stock is expec
ID: 2646818 • Letter: T
Question
The common stock of Auto Deliveries sells for $26.21 a share. The stock is expected to pay $2.00 per share next month when the annual dividend is distributed. Auto Deliveries has established a pattern of increasing its dividends by 4.1 percent annually and expects to continue doing so. What is the market rate of return on this stock?
project A; because it has the higher required rate of return project A; because its NPV is about $4,900 more than the NPV of project B project B; because it has the largest total cash inflow project B; because it has the largest cash inflow in year one project B; because it has the lower required returnExplanation / Answer
Refer to the following information to answer the following:
Project B will be chosen because it has the lower required rate of return.
Since, the required rate of return is lower in the case of project B the discount rate will be lower as compared to the project A.
Hence, the discounted cash flows of project B will be greater.
Also, Required Rate of Return is the minimum annual percentage which is earned by an investment that will encourage individuals or companies to put money into a particular project.
Hence, the correct option is E.