A Stock Is Expected to Pay $0

question 70

Multiple Choice

A stock is expected to pay $0.80 per share every year indefinitely.If the current price of the stock is $18.90,and the equity cost of capital for the company that released the shares is 6.4%,what price would an investor be expected to pay per share five years into the future?

• A)$12.50
• B)$20.43
• C)$21.23
• D)$22.65
• E)$22.90

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Definitions:

Hydrostatic Pressure

The pressure exerted by a fluid at equilibrium due to the force of gravity acting upon it.

Filtration Membrane

A biological or synthetic membrane that acts as a selective barrier, allowing some substances to pass while blocking others, especially used in filtering substances from the blood in the kidneys.

Nephron

The basic structural and functional unit of the kidney, responsible for filtering blood and producing urine.

Glomerular Capsule

A cup-shaped structure surrounding the glomerulus in each nephron of the kidney, where filtration of blood plasma occurs.