Exhibit 12.2 Use the Information Below for the Following Problem(S)

question 36

Multiple Choice

Exhibit 12.2
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds falls to 8 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.
-Refer to Exhibit 12.2.To what price will the market rise if the earnings expectation is $32.00?

• A) $384.00
• B) $266.56
• C) $213.44
• D) $200.00
• E) $125.44

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Definitions:

Personality

The combination of characteristics or qualities, including patterns of thought, feelings, and behaviors that make a person unique.

Reactive Autonomic Nervous System

Refers to the part of the autonomic nervous system that responds involuntarily to stress, causing physical reactions.

Emotional Stability

A personality trait that reflects the extent to which a person's mood and emotions are consistent and not prone to frequent fluctuations.

Self-esteem

A person's internal judgment of their own significance or merit.