Use the Information for the Question(s)below

question 27

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 on purchasing Von Bora stock in one year,right after the $1.40 dividend is paid.You then plan on selling your stock at the end of year two,right after the $1.50 dividend is paid.The dividend yield that you will receive on your investment is closest to:

• A)5.75%.
• B)6.50%.
• C)6.25%.
• D)4.00%.

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Definitions:

Unlimited Wants

The economic concept that humans have insatiable desires for goods and services, which exceeds the resources available to satisfy them.

Individuals

Single human beings, considered separately from society or as distinct entities with personal interests and responsibilities.

Fallacy of Composition

The error of assuming that what is true of a part is necessarily true of the whole.

Prosperity

A state of economic well-being characterized by high levels of income, employment, and production.