A Firm Does Not Pay a Dividend

question 86

Multiple Choice

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

• A) $4.42
• B) $4.59
• C) $5.43
• D) $7.21

---

Definitions:

Immature

Underdeveloped or not fully developed; often used to describe cells, organisms, or behavior that is not fully matured.

Nervous System

A complex network of nerves and cells that transmit signals between different parts of the body, responsible for controlling bodily functions and responding to external stimuli.

Reye Syndrome

A rare but serious condition that causes swelling in the liver and brain, often occurring in children recovering from a viral infection who have used aspirin.

Tylenol

A brand name for acetaminophen, a common over-the-counter medication used to reduce fever and relieve pain.