Modular Systems Inc

question 32

Multiple Choice

Modular Systems Inc.just paid dividend D0, and it is expecting both earnings and dividends to grow by 0 percent in Year 2, by 5 percent in Year 3, and at a rate of 10 percent in Year 4 and thereafter.The required return on Modular is 15 percent, and it sells at its equilibrium price, P0 = $49.87.What is the expected value of the next dividend? (Hint: Set up and solve an equation with the unknown.)

• A)It cannot be estimated without more data.
• B)$1.35
• C)$1.85
• D)$2.35
• E)$2.85

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Definitions:

Risk-Seeking

A tendency to pursue opportunities with potentially high rewards despite the associated high risks.

Tacit Knowledge

Knowledge that is difficult to transfer to another person by means of writing it down or verbalizing it, often gained through personal experience.

Codified Knowledge

Knowledge that is structured and documented in a way that it can be easily communicated to others.

Emotional Cohesion

The bond or connection between members of a group or team based on shared emotions, empathy, and emotional support.