The Dividend on Simple Motors Common Stock Will Be $2

question 52

Multiple Choice

The dividend on Simple Motors common stock will be $2 in one year, $3.50 in two years, and $5.00 in three years. You can sell the stock for $75 in three years. If you require a 10% return on your investment, how much would you be willing to pay for a share of this stock today?

• A) $59.69
• B) $64.65
• C) $64.82
• D) $65.66
• E) $71.30

Understand the concept and implications of retained earnings restrictions.

Recognize the accounting treatments and implications of stock dividends and cash dividends.

Prepare journal entries for dividend declarations and payments.

Adjust and present retained earnings in light of prior period adjustments and dividend transactions.

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Definitions:

3-Methylhept-4-yn-3-ol

An organic molecule characterized by a chain of eight carbon atoms with a triple bond and a methyl and alcohol functional group attached.

But-1-yne

An alkyne hydrocarbon with the chemical formula C4H6, having a triple bond between the first and second carbons.

Base-Catalyzed Hydration

A reaction in which water adds across a carbon-carbon double bond in the presence of a base, leading to the formation of an alcohol.

2-Butanone

Also known as methyl ethyl ketone (MEK), it is a solvent used in various industrial applications with a sharp, sweet odor.