Natalie Is Interested in Valuing the Shares of Union Aerospace

question 111

Multiple Choice

Natalie is interested in valuing the shares of Union Aerospace (UA) .UA pays dividends annually.She expects the stock to pay dividends of $3 at the end of each of the next four years.Thereafter,she expects the dividend to grow at 7% per annum in perpetuity.If her required return is 12%,then how much should she pay for a share?

• A) $43.63
• B) $45.54
• C) $47.24
• D) $49.91
• E) $73.31

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Definitions:

Shareholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing ownership interest.

Expenses

Costs incurred in the process of generating revenue, typically including items like rent, salaries, and utilities.

Source Documents

Original records and documents containing the details that support or verify the transactions entered in an accounting system.

Chart of Accounts

An organized list of all the account titles and numbers being used to track financial transactions and prepare financial statements in a company.