A Firm Is Currently Selling for $50 a Share and Has

question 9

Multiple Choice

A firm is currently selling for $50 a share and has a cost of capital of 12%. It has expected earnings of $1.50 a share. What is the present value of its growth opportunities?

• A)$33.33
• B)$35.00
• C)$37.50
• D)$12.50

---

Definitions:

Payments of Interest

The act of paying the interest charge on a loan or debt, typically made at regular intervals over the lifetime of the loan.

Payments for Income Tax

Financial outlays made by individuals or corporations to government entities in accordance with taxable income or profits.

Unearned Rental Revenue

Income received from tenant payments before the rental period has occurred, recorded as a liability until earned through the passage of time.

Rent Revenue

Income generated from leasing out property or equipment to another party.