A Share You Are Interested in Paid a Dividend of £1

question 62

Multiple Choice

A share you are interested in paid a dividend of £1 last week.The anticipated growth rate in dividends and earnings is 20% for the next year and 10% the year after that before settling down to a constant 5% growth rate.The discount rate is 12%.Calculate the expected price of the share.

• A)£17.20
• B)£17.91
• C)£18.20
• D)£19.40
• E)£19.75

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Definitions:

Marginal Revenue Product Curve

The marginal revenue product curve illustrates how a firm's revenue changes with the employment of an additional unit of a resource, holding other factors constant.

Product Demand

The quantity of a good or service that consumers are willing and able to purchase at a given price over a specified period of time.

Product Price

The total money demanded to buy a given product or service.

Marginal Product

The extra production achieved through the use of an additional unit of a specific input, while keeping all other inputs unchanged.