The Lighthouse Co

question 127

Multiple Choice

The Lighthouse Co. is in a downsizing mode. The company paid a $2.50 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 16% on this particular stock given the company's situation. What is one share of this
Stock worth to you today?

• A) $3.76
• B) $4.08
• C) $4.87
• D) $5.13
• E) $5.39

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Definitions:

Parameter

A numerical characteristic that describes a statistical population, such as a mean or standard deviation.

Statistic

A single measure, calculated from a sample, used to estimate the value of a population parameter.

Population

The entire group of individuals or instances about whom the study is concerned or from which a statistical sample is drawn for analysis.

Sample

A subset of a population used in statistical analysis to estimate characteristics or outcomes of the entire population.