Balloons, Inc

question 49

Multiple Choice

Balloons, Inc. normally pays a annual dividend. The last such dividend paid was $0.80, all future annual dividends are expected to grow at 8 percent, and the firm faces a required rate of return on equity of 13 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $2.00 per share that is not expected to affect any other future dividends, what should the stock price be?

• A) $16.00
• B) $17.01
• C) $17.28
• D) $18.29

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