API Has Just Paid an Annual Dividend of $1

question 56

Multiple Choice

API has just paid an annual dividend of $1.39 per share and expects to increase it by 3.5 percent annually for the foreseeable future. Calculate the current value of API's common stock given a discount rate of 6 percent.

• A)$55.60
• B)$56.30
• C)$57.55
• D)$58.34
• E)$58.50

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Definitions:

Cash Outflow

Cash Outflow refers to the movement of money out of a business, including expenses, payments to creditors, or investments, which impacts the company's cash balance.

Financing Activities

Comprises transactions that result in changes in the size and composition of the equity capital or borrowings of an entity. Examples include issuing bonds, repaying bank loans, and paying dividends.

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.