The Double Dip Co

question 102

Multiple Choice

The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 5%
A year for the next two years. After that, it will maintain a constant dividend of $1 a share. Last year,
The company paid $1.40 per share. What is this stock worth to you if you require a 9% rate of return?

• A) $10.86
• B) $11.11
• C) $11.64
• D) $12.98
• E) $14.23

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Definitions:

Adam Smith

Scottish economist known as the father of modern economics, best known for his theory on free markets and the invisible hand guiding economies.

Specialization and Exchange

Economic strategy where individuals, regions, or nations focus on producing goods in which they have a comparative advantage, and then trade with others for what they need.

Trade Barriers

Measures implemented by governments to control or limit the volume of goods and services imported or exported, affecting international trade.

Trade Surplus

A situation where the value of a country’s exports exceeds the value of its imports.