For a Particular Share a Dividend of 20p Will Be

question 12

Multiple Choice

For a particular share a dividend of 20p will be paid after 1 year, at which time the share is expected to be sold for 250p. If the risk class justifies a rate of return of 20 per cent, how much should an investor pay for the shares today?

• A) 240p
• B) 250p
• C) 225p
• D) 275p

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Definitions:

Straight-Line Depreciation Rate

A method of calculating the depreciation of an asset, where the asset's cost is evenly distributed over its useful life.

Useful Life

The estimated duration an asset is expected to be economically usable, with normal wear and tear.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, representing the asset's wear and tear, deterioration, or obsolescence.

Units-of-Activity Method

A depreciation technique that calculates the depreciation of an asset based on its usage, activity, or units produced instead of time.