Von Bora Corporation (VBC)is Expected to Pay a $2

question 78

Multiple Choice

Von Bora Corporation (VBC) is expected to pay a $2.00 dividend at the end of this year.If you expect VBC's dividend to grow by 5% per year forever and VBC's equity cost of capital is 13%,then the value of a share of VBS stock is closest to:

• A) $25.00
• B) $40.00
• C) $15.40
• D) $11.10
• E) $10.00

---

Definitions:

Tax Liability

The total amount of tax that individuals or businesses are legally obligated to pay to tax authorities.

Income from Operation

A company's earnings before interest and taxes (EBIT), representing the profit from ongoing, core business activities.

Dividends

Payments made by a corporation to its shareholders, typically from profits.

Shareholder Equity

The residual interest in the assets of a company after deducting liabilities, representing the net worth attributable to shareholders.