Software Sales Supply Is Expected to Pay Its First Annual

question 32

Multiple Choice

Software Sales Supply is expected to pay its first annual dividend of $.1.10 per share in Year 3.Starting in Year 6, the company plans to increase the dividend by 3.2 percent per year.What is the value of this stock today, Year 0, at a required return of 13.1 percent?

• A)$8.22
• B)$11.31
• C)$11.49
• D)$10.35
• E)$12.66

---

Definitions:

Quick Ratio

A liquidity ratio measuring a company's ability to meet short-term obligations with its most liquid assets, excluding inventories.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

EBITDA Coverage Ratio

Similar to the times-interest-earned ratio, but it recognizes that many firms lease assets and also must make sinking fund payments. It is found by adding earnings before interest, taxes, depreciation, and amortization and lease payments, then dividing this total by interest charges, lease payments, and sinking fund payments over 1 minus the tax rate.

TIE

Times Interest Earned, a financial metric indicating how well a company can meet its interest obligations based on current earnings.