Florida Sports Magazine Is a Publicly Traded Company

question 108

Multiple Choice

Florida Sports Magazine is a publicly traded company.The next dividend will be paid in one year and is expected to be $1.25 per share.Dividends are expected to grow at 10 percent a year for the next three years,and then grow at 8 percent a year thereafter.The appropriate discount rate for investing in this firm is 15 percent.What should be the current stock price?

• A) $21.27
• B) $10.76
• C) $22.40
• D) $17.33
• E) $18.75

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Definitions:

Regressive Tax

A tax imposed in such a way that the tax rate decreases as the amount subject to taxation increases, burdening lower-income individuals relatively more than higher-income ones.

Direct Tax

Taxes paid directly to the government by the taxpayer, such as income tax.

Indirect Tax

A tax collected by an intermediary (like a retailer) from the person who bears the ultimate economic burden of the tax (like the consumer). Examples include sales tax and VAT (Value Added Tax).

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements that may or may not align with the calendar year.