Exhibit 11.5 Use the Information Below for the Following Problem(S)

question 78

Multiple Choice

Exhibit 11.5
Use the Information Below for the Following Problem(S)
The National Motor Company's last dividend was $1.25 and the directors expect to maintain the historic 4 percent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7 percent for the next three years and the stock will then reach $25.00 per share.
-Refer to Exhibit 11.5.How much should you be willing to pay for the stock if you require a 16 percent return?

• A) $17.34
• B) $18.90
• C) $19.09
• D) $19.21
• E) None of the above

---

Definitions:

Income

The financial gain received by an individual or a business in exchange for providing goods or services or through investing capital.

Labor Income

Earnings derived from work, including wages, salaries, bonuses, and other compensation for employment.

Nonlabor Income

Earnings derived from sources other than employment, such as investments, pensions, or inheritance.

Leisure

The time individuals spend away from work or essential activities, dedicated to relaxation, recreation, or hobbies.