Hupta Corporation -Net Income Is Expected to Increase by 10% for the 2

question 43

Multiple Choice

Hupta Corporation
$$\begin{array} { l r } & \mathbf { 2 0 0 5 } \\\text { Net income } & \$ 6,000 \\\text { Dividends } & \$ 2,000 \\\text { Total assets-12/31/05 } & \$ 50,000 \\\text { Total liabilities-12/31/05 }& \$ 20,000 \\\text { Number of shares outstanding } & 1,000 \\\text { Cost of equity } & 10 \%\end{array}$$
-Net income is expected to increase by 10% for the next year, and dividend payout ratio is expected to remain constant. After 2006, residual earnings are expected to decrease to zero. Using the earnings-based valuation method, what is the value per share of Hupta stock as of 12/31/05?

• A)$33.60
• B)$33.27
• C)$32.73
• D)$30.00

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Definitions:

Pie Chart

A circular statistical graphic which is divided into slices to illustrate numerical proportion.

Skewed To The Right

A description of a distribution that has a long tail on the right side, indicating that there are a number of observations that are significantly higher than the rest of the data.

Skewed To The Left

Describes a distribution of data where the tail is longer on the left side of the distribution graph, indicating that the bulk of the data points are to the right.

Symmetric

Refers to a balance or similarity between two halves of an object, dataset, or distribution where each side is a mirror image of the other.