The Following Information Relates to Yutter Corporation -What Is the Value of Yutter's Stock at the End

question 24

Multiple Choice

The following information relates to Yutter Corporation:
$\begin{array}{lr}&\text { Year } 1\\\text { Net income-year ended } 12 / 31 & \$ 12,500 \\\text { Dividends } & 3,000 \\\text { Return on net operating assets } & 13 \% \\\text { Return on equity } & 15 \% \\\text { Cost of equity } & 12 \%\end{array}$
-What is the value of Yutter's stock at the end of Year 1 using the dividend discount model assuming that the dividend payout ratio remains constant and Yutter grows at its sustainable equity growth rate?

• A)$83,333
• B)$157,642
• C)$500,000
• D)$557,000

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Definitions:

RRSP

Registered Retirement Savings Plan, a Canadian investment vehicle for individuals to save for retirement while taking advantage of tax deferrals.

Years

Years are units of time that measure the duration or length of time an event has occurred or is expected to occur, usually related to financial calculations or investments.

Invest

To allocate resources, usually money, with the expectation of generating an income or profit.

Investments

Assets purchased with the expectation that their value will grow or generate income.