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:

Tentative Explanation

A preliminary hypothesis offered as a possible account for specific phenomena, which may require further validation.

Autonomy Vs Constraint

A conceptual dichotomy exploring the balance between individual freedom and the limitations imposed by societal norms, laws, or physical circumstances.

Democratic Revolution

A radical change in political power or organizational structures that results in the establishment of a democracy, where power is vested in the people.

Industrial Revolution

A period of major industrialization from the late 18th to early 19th century that transformed predominantly agrarian societies into industrialized ones.