A Company Is Expected to Pay a Dividend of $0

question 52

Multiple Choice

A company is expected to pay a dividend of $0.80 per share every year indefinitely. If the current price of the share is $18.90, and the equity cost of capital for the company is 6.4%, what price would an investor be expected to pay per share five years into the future?

• A) $21.23
• B) $20.43
• C) $12.50
• D) $22.65

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Definitions:

Test Performance

An individual's performance or achievement on exams or assessments, measuring knowledge, ability, or skill in a particular area.

Yerkes-Dodson Law

A theory suggesting that there is an optimal level of arousal for the best performance of a task: too little or too much arousal can decrease performance.

Physiological Arousal

A physical state of heightened alertness and readiness to respond, involving changes such as increased heart rate, blood pressure, and sensory alertness.

Peak Performance

The state of delivering maximum productivity or achieving the highest level of performance in a given task.