You Have Decided That You Would Like to Own Some

question 60

Multiple Choice

You have decided that you would like to own some shares of GH Corp. but need an expected 12% rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.50 annual dividend per share?

• A) $26.04
• B) $29.17
• C) $32.67
• D) $34.29
• E) $36.59

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Definitions:

Flexible Budgets

Budgets that adjust or flex with changes in volume or activity levels of a business.

Static Budget

A budget based on a set level of activity and does not change in response to changes in business activity levels during the budget period.

Overhead Costs

Indirect costs incurred in the production process or in the provision of services that cannot be directly tied to a specific product or service.

Overhead Allocation

The process of distributing indirect costs to cost objects such as products, services, or business units.