Macaroni Inc

question 54

Multiple Choice

Macaroni Inc.announced that it would pay the following dividends over the next five years: $0.50, $0.75, $1.50, $3, and $4.Afterwards, dividends will decline at a rate of 3% per year indefinitely.What is the firm's current share price if the required rate of return is 13%?

• A)$30.33
• B)$24.25
• C)$19.25
• D)$17.73

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Definitions:

Fixed Rate System

A regime where a country’s currency is tied to another currency or a basket of currencies at a set exchange rate.

International Treaty

A formal agreement between two or more countries that is recognized and governed by international law.

International Monetary Fund

A global organization created to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Devaluation

The official lowering of the value of a country's currency within a fixed exchange rate system, usually to encourage exports.