Exhibit 12.1 Use the Information Below for the Following Problem(S)

question 98

Multiple Choice

Exhibit 12.1
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 65 percent when the rate on long-term government bonds falls to 8 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.
-Refer to Exhibit 12.1.To what price will the market rise if the earnings expectation is $22.00 per share?

• A) $183.26
• B) $132.41
• C) $198.66
• D) $71.28
• E) $14.30

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Definitions:

Cochlea

A spiral-shaped, fluid-filled inner ear structure responsible for converting sound waves into nerve impulses.

Middle Ear

The portion of the ear internal to the eardrum and external to the inner ear, containing three small bones that transmit sound vibrations to the inner ear.

Hammer

A tool typically used for pounding nails into, or extracting nails from, some other object. Generally features a handle and a heavy head.

Anvil

A heavy iron block typically used in metalworking upon which metal can be hammered and shaped.