Beaksley SA Is a Very Cyclical Type of Business Which

question 76

Multiple Choice

Beaksley SA is a very cyclical type of business which is reflected in its dividend policy.The firm pays a €2.00 a share dividend every other year.The last dividend was paid last year.Five years from now, the company is repurchasing all of the outstanding shares at a price of €50 a share.At an 8% rate of return, what is this equity worth today?

• A)€34.03
• B)€37.21
• C)€43.78
• D)€48.09
• E)€53.18

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Definitions:

Sacrifice Ratio

The measure of the decline in a country's economic output as a result of efforts to reduce inflation.

High Inflation

A condition characterized by a significant and sustained rise in the general level of prices for goods and services, eroding purchasing power.

Nominal Wages

The wages paid to employees measured in current money and not adjusted for inflation, reflecting the face value of earnings.

Labor Markets

Economic markets in which labor services are bought and sold, including the supply of labor by households and the demand for labor by firms.