During the Past 7 Years, Burger Flippin' Corp

question 36

Multiple Choice

During the past 7 years, Burger Flippin' Corp.'s earnings have grown from $0.75 to $1.95 per share.If the past growth rates are expected to continue into the future, what is the current value of Flippin's common stock to an investor who requires a 16% rate of return?

• A)$97.50
• B)$13.93
• C)$111.15
• D)$48.50

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Definitions:

Guaranteed A Profit

An assurance that an investment or business endeavor will yield a positive return or profit.

Long Run

In economics, a period in which all inputs, including capital, can be fully adjusted, allowing firms to change their scale of operation.

Economic Profit

An economic profit occurs when the revenue generated from a business activity exceeds both the explicit and implicit costs associated with that activity.