Killnum Corp

question 246

Multiple Choice

Killnum Corp. announces that the dividend for the next year will be $2.50 per share rather than the originally expected $1.50 per share. From then on, it is expected that dividends will resume their historical constant growth rate of 5% per year. What would you expect to happen to the price of the stock? Ignore any tax effects.

• A) The price will likely double.
• B) The price will likely rise by less than 100%.
• C) The price will likely rise by exactly 50%.
• D) The price will remain unchanged.
• E) The price will likely rise by the present value of $1.

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Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.