Which of the Following Amounts Is Closest to What Should

question 48

Multiple Choice

Which of the following amounts is closest to what should be paid for Overland common stock? Overland has just paid a dividend of $2.25. These dividends are expected to grow at a rate of 5% in the foreseeable future. The risk of this company suggests that future cash flows should be discounted at a rate of 11%.

• A) $39.38
• B) $37.50
• C) $21.48
• D) $20.45

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