If Expected Dividends Grow at 8% and the Appropriate Discount

question 35

Multiple Choice

If expected dividends grow at 8% and the appropriate discount rate is 11%,what is the value of a share with an expected dividend of $2.50?

• A) $22.73
• B) $31.25
• C) $13.16
• D) $83.33

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Definitions:

360-Day Year

A method used in accounting and finance that assumes a year has 360 days to simplify interest calculations.

Ordinary Simple Interest Rate

The standard interest rate applied to a loan or investment, calculated on the principal amount without compounding over a specific period.

360-Day Year

A financial calculation assumption where the year is considered to have 360 days for simplifying interest calculations.

Exact Simple Interest

Interest calculated precisely on the principal amount over a specific period, normally based on a 365-day year.