If a Company Pays a Dividend of $5 to Be

question 65

Multiple Choice

If a company pays a dividend of $5 to be received one year from now,dividends are expected to grow at a rate of 8 percent per year for the indefinite future,and the interest rate is 14 percent,the price of the company's stock should be ________ per share.

• A)$8.00
• B)$83.33
• C)$227.27
• D)$610.00

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Definitions:

Net Working Capital

The disparity between a company's immediate assets and immediate liabilities, showcasing its short-term economic well-being.

Straight-Line Depreciation

An accounting method that allocates the cost of a tangible asset evenly over its useful life.

Variable Cost

Outlays that shift in alignment with the quantity of output generated.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument back to their present value, thus reflecting the cost of capital.