A firm has a current price of $40 a share, an expected growth rate of 11 percent and expected dividend per share (D1) of $2. Given its risk, you have a required rate of return for it of 12 percent. Your expected rate of return and investment decision is as follows:A) 10 percent  do not buyB) 12 percent  do not buyC) 14 percent  buyD) 16 percent  buyE) 18 percent  buy

D) 16 percent -  buy

Explanation:

R = (D1 / P0) + g

R=Expected Return, P0=Current Market Price = $40, D1 = Expected Dividend = $2,  g=Expected Growth Rate = 11% = 0.11

Expected Return = R = (2/40)+0.11

R = 0.05+0.11

R = 0.16

R = 16%

The Expected Return is higher than the required return of 12%. Hence, it should be bought (it is expected to give higher return than required)

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.