Benny Simpson Is Considering an Investment in Pontoon Industries Inc

question 7

Multiple Choice

Benny Simpson is considering an investment in Pontoon Industries Inc. He anticipates a dividend of $0.50 next year and an increase in the stock price from the current price of $18.25 per share to $20 per share. If he plans to hold the stock for one year, should Mr Simpson buy the stock if he requires an annual return of 12% on similar-risk investments?

• A) no, because his anticipated return of 2.74% is exceeded his required return of 12%
• B) no, because his anticipated return of 9.59% is exceeded his required return of 12%
• C) yes because his anticipated return of 12.33% exceeds his required return of 12%
• D) There is not enough information to answer this question.

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Definitions:

Ecdysozoa

A group of protostome animals, including arthropods and nematodes, characterized by periodic shedding of their exoskeletons during growth.

Lophotrochozoa

A major group within the animal kingdom, which includes organisms that have either a lophophore for feeding or a trochophore larval stage in their development.

Deuterostomes

Animals characterized by the development of the anus from the first opening in the embryo, with humans and starfish as examples.

Metazoan

A multicellular organism of the kingdom Animalia, characterized by complex structures and systems that perform specific functions.