Exhibit 14 -A Firm Has a Current Price of $40 a Share,an

question 90

Multiple Choice

Exhibit 14.5
Use the Information Below for the Following Problem(S)
$$\begin{array} { l c c } & \text { Wal-Elue } & \text { Industry } \\ \text { DPS } & 1.00 & 1.50 \\\text { Total As5et Tunover } & 3.20 & 2.50 \\\text { Net Profit Marpin } & 3.50 \% & 3.00 \% \\\text { EpS } & 4.00 & 3.00 \\\text { Total As5ets/Equity } & 3.00 & 4.00\end{array}$$
-A firm has a current price of $40 a share,an expected growth rate of 11 percent and expected dividend per share (D1) of $2.Given its risk you have a required rate of return for it of 12 percent.Assuming that you expect the stock price to increase to $42 during the investment period,your expected rate of return and decision would be:

• A) 10% - do not buy
• B) 12% - do not buy
• C) 14% - buy
• D) 16% - buy
• E) 18% - buy

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Definitions:

Biconditional

A logical statement combining two conditions where each implies the other; written as "if and only if."

Tautology

A redundant or repetitive statement in which the same thing is said twice in different words.

Main Component

A primary or essential part of a larger whole or system.

Biconditional

A logical relation between statements where both are either simultaneously true or simultaneously false.