Use the Information for the Question(s)below

question 2

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%.
-Suppose you plan to hold Von Bora stock for only one year.Your capital gain from holding Von Bora stock for the first year is closest to:

• A)$0.95.
• B)$1.40.
• C)$1.85.
• D)$1.25.

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Definitions:

Absorption Costing

An accounting method that includes both variable and fixed manufacturing overhead costs in the cost of a product.

Cost-plus Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the investment's cost.

Markup

A markup on the base cost of goods intended to cover the expenses of operation and ensure a profit margin.