Suppose That a Firm's Recent Earnings Per Share and Dividends

question 6

Multiple Choice

Suppose that a firm's recent earnings per share and dividends per share are $3.00 and $1.50, respectively. Both are expected to grow at 10 percent. However, the firm's current P/E ratio of 20 seems high for this growth rate. The P/E ratio is expected to fall to 16 within five years. Compute a value for this stock by first estimating the dividends over the next five years and the stock price in five years. Then discount these cash flows using a 14 percent required rate.

• A) $31.68
• B) $40.15
• C) $46.89
• D) $60.00

Comprehend the legal perspectives on discrimination, particularly regarding age and employment termination.

Recognize the fundamental rights covered by The Canadian Charter of Rights and Freedoms.

Differentiate between federal and provincial human rights legislation in Canada.

Identify appropriate workplace policies and practices for accommodating diverse employee needs, including transgender employees.

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Definitions:

Majority Rule

A decision rule that selects alternatives which have a majority, that is, more than half the votes.

Median Voter Theorem

A political science theory suggesting that the outcome of a majority-vote election is most likely to represent the preferences of the median voter.

Majority Rule

A decision-making process where the choice supported by more than half of the members in a group is accepted or becomes the decision.

Median Voter Theorem

A theory suggesting that a majority rule voting system will select the outcome most preferred by the median voter.