You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate of return to compensate for the perceived risk. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $1.25 annual dividend per share?

(A) 9.38

(B) $9.11

(C) $8.62

(D) $9.26

(E) $8.47

(C) $8.62

Explanation:

Data given in the question

Rate of return = 14.5%

Annual dividend per share = $1.25

So by considering the above information, the maximum price per share to buy this stock is

Price per share = (Annual dividend per share) : (Rate of return)

= ($1.25) : (14.5%)

= $8.62

By dividing the annual dividend per share from the rate of return we can get the price per share