A Firm Does Not Pay a Dividend

question 35

Multiple Choice

A firm does not pay a dividend. It is expected to pay its first dividend of $0.15 per share in three years. This dividend will grow at 9 percent indefinitely. Using a 10 percent discount rate, compute the value of this stock.

• A) $12.28
• B) $12.40
• C) $16.35
• D) $16.50

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Definitions:

Control Coil

An electromagnetic coil used in electrical circuits to magnetically control the operation of devices like relays or contactors.

Magnetic Forces

The attraction or repulsion that arises between electrically charged particles due to their motion, which is the basis for the operation of electrical motors and devices.

Armature

The rotating part of an electrical machine such as a motor or generator, on which the coils are wound and voltage is induced.

Core

The central part of an electromagnetic coil or transformer, made of magnetic material, that intensifies its magnetic field.