Dynamic Industries Paid a Dividend of $1

question 51

Multiple Choice

Dynamic Industries paid a dividend of $1.65 on its common stock yesterday.The dividends of Wallace Industries are expected to grow at 9% per year indefinitely.If the risk-free rate is 3% and investors' risk premium on this stock is 8%,estimate the value of Wallace Industries stock 2 years from now.

• A) $106.84
• B) $100.43
• C) $91.81
• D) $54.71

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Definitions:

Expectancy Theory

A motivational theory positing that individuals are motivated to act in certain ways based on their expectations of future outcomes and the attractiveness of those outcomes.

Motivation

The psychological processes that arouse and direct goal-directed behavior.

Work

A physical or mental effort done in order to achieve a purpose or result, often associated with employment or tasks.

Telecommuting

A work arrangement in which employees do not commute to a central place of work, instead working via electronic communications from a different location, often their home.