Simplicity Is a Relatively New fiRm That Appears to Be

question 381

Multiple Choice

Simplicity is a relatively new firm that appears to be on the road to great success. The company paid their first annual dividend yesterday in the amount of $0.15 a share. The company plans to
Double each annual dividend payment for the next four years. After that time, they are planning on
Paying a constant dividend of $2.50 per share indefinitely. What is one share of this stock worth
Today if the market rate of return on similar securities is 13.45%?

• A) $12.32
• B) $12.77
• C) $13.77
• D) $14.22
• E) $14.37

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Definitions:

Controlling Account

The account in the general ledger that summarizes the balances of the accounts in a subsidiary ledger.

General Ledger

The primary ledger, when used in conjunction with subsidiary ledgers, that contains all of the balance sheet and income statement accounts.

Direct Materials

Raw materials that can be directly traced to the production of a specific product or service.

Work in Process

The total value of materials and labor for products that are partially completed but not yet ready for sale.