Assume That the Discount Factor of a Stock Is 12

question 81

Multiple Choice

Assume that the discount factor of a stock is 12 percent and that cash flows are expected to grow 2 percent. What is the price of the stock if the original cash flow is $100?

• A)$1,400
• B)$1,200
• C)$800
• D)$1,000

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Definitions:

Aerial Perspective

Aerial Perspective, also known as atmospheric perspective, is the effect by which objects appear less distinct and more bluish the farther they are from the observer, due to the atmosphere's effect on the colors and lights.

Motion Parallax

A depth cue in which objects closer move faster across the field of view than those farther away, giving a sense of depth.

Linear Perspective

A depth cue in which parallel lines converge as they recede into the distance, aiding in the perception of depth.

Persistence of Vision

The phenomenon where an image continues to appear in one's vision after the exposure to the original image has ceased, underlying the principle of motion pictures.