Modular Systems Inc

question 89

Multiple Choice

Modular Systems Inc.just paid dividend D₀,and it is expecting both earnings and dividends to grow by 0 percent in Year 1 and 2,by 5 percent in Year 3,and at a rate of 10 percent in Year 4 and thereafter.The required return on Modular is 15 percent,and it sells at its equilibrium price,P₀ = $49.87.What is the expected value of the next dividend, ? (Hint: Draw a time line and then set up and solve an equation with one unknown, )

• A) It cannot be estimated without more data.
• B) $1.35
• C) $1.85
• D) $2.35
• E) $2.85

---

Definitions:

Price Fixing

An agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.

Criminally Liable

The legal responsibility for committing a crime, where an individual is subject to prosecution and potential punishment under criminal law.

Subjective Fault

A legal concept pertaining to the personal and individual blame or responsibility one has due to their own mental state or intentions.

Objective Fault

involves assigning blame or legal responsibility based on the failure to meet an objective standard of care or conduct, irrespective of the actor's intent.