Mega Inc Is Expected to Pay a Dividend of $2

question 42

Multiple Choice

Mega Inc. is expected to pay a dividend of $2.00 per share next year. The dividends are expected togrow at a constant rate of 5% per year indefinitely. If investors require a 12% return on Mega stock,what is the current price?

• A) $32.00
• B) $16.67
• C) $30.00
• D) $28.57

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Definitions:

Accounts Payable

Liabilities representing amounts owed by a company to creditors for purchases of goods or services on credit, typically due within a short period.

Accrue Cost

The process of recording expenses and liabilities as soon as they are incurred, regardless of when cash is exchanged.

Accounting Cycle

The collective process of identifying, analyzing, and recording the accounting events of a company.

Post-closing Trial Balance

A trial balance prepared after closing entries are made, used to check the balance of debits and credits have been maintained throughout the period after all closing entries are completed.