The Absolute Finance Company (AFC) Earned $5 a Share Last

question 29

Multiple Choice

The Absolute Finance Company (AFC) earned $5 a share last year and paid a dividend of $2 per share. Next year, you expect AFC to earn $6 a share next year and continue its payout ratio. Assume that you expect to sell the stock for $45 a year from now. If you require a 13 percent return on this stock, how much would you be willing to pay for it?

• A) $41.95
• B) $43.21
• C) $45.13
• D) $46.72
• E) $47.40

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Definitions:

Aldosterone

Aldosterone is a steroid hormone produced by the adrenal glands, which helps regulate blood pressure by controlling sodium and water balance in the body.

Insensible Perspiration

Perspiration that evaporates before it is perceived as moisture on the skin; the term sometimes includes evaporation from the lungs.

Blood Volume

The total amount of blood circulating within the body, vital for optimal health and functioning of the organs.

Temperature Control

The biological and mechanical process by which an organism or system maintains its internal temperature within a certain range despite external fluctuations.