Use the Information for the Question(s)below

question 78

Multiple Choice

Use the information for the question(s) below.
Von Bora Corporation is expected to pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year.You expect Von Bora's stock price to be $25.00 at the end of two years.Von Bora's equity cost of capital is 10%.
-The price you would be willing to pay today for a share of Von Bora stock,if you plan to hold the stock for two years is closest to:

• A)$23.15.
• B)$20.65.
• C)$21.95.
• D)$21.90.

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Definitions:

Marginal Costs

The cost of producing one additional unit of a good or service.

Profit-Maximizing

The process by which a company determines the price and output level that returns the greatest profit.

Long Run

A period in economics where all factors of production and costs are variable, allowing for full adjustment to changes.

ATC

Average Total Cost; the per unit cost of production, calculated by dividing the total cost by the quantity produced.