Universal Air Is a No Growth Firm and Has Two

question 14

Multiple Choice

Universal Air is a no growth firm and has two million shares outstanding. It is expected to earn a constant 20 million per year on its assets. If all earnings are paid out as dividends and the cost of capital is 10%, calculate the current price per share for the stock.

• A) $200
• B) $150
• C) $100
• D) $50

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Definitions:

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms or societal standards.

Solomon Asch

A psychologist known for his research on conformity, demonstrating how group pressure can influence an individual to conform.

Familiarity Effect

A phenomenon where people tend to develop a preference for things merely because they are familiar with them.

Fundamental Attribution Error

The tendency to overemphasize personal characteristics and ignore situational factors in judging others' behavior.