Main Street Tool & Die Is in a Downsizing Mode

question 270

Multiple Choice

Main Street Tool & Die is in a downsizing mode. The company paid a $2 annual dividend last year. The company has announced plans to lower the dividend by $.50 a year. Once the dividend
Amount becomes zero, the company will cease all dividends permanently. You place a required rate
Of return of 18% on this particular stock given the company's situation. What is one share of this
Stock worth to you today?

• A) $2.29
• B) $2.47
• C) $2.68
• D) $2.72
• E) $2.83

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Definitions:

Utility Function

Represents a mathematical model in economics which shows preferences over a set of goods and services, depicting satisfaction levels of consumers.

Probability

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Utility Function

A mathematical representation of how consumer preferences over a set of goods and services translate into choices given their budget constraint.

Probability

Probability measures the likelihood of a particular outcome or event occurring, expressed as a number between 0 and 1.