Value of Future Cash Flows a Firm Recently Paid a $1.00

question 74

Multiple Choice

Value of Future Cash Flows A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is its current value?

• A) $25.00
• B) $36.60
• C) $62.87
• D) $72.30

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Definitions:

Mid-ocean Ridge

An underwater mountain range, formed by plate tectonics, that stretches across the ocean floors and is characterized by a rift at its summit from which new oceanic crust is formed.

Seafloor Elevation

The vertical height of the ocean floor above or below a reference surface, typically mean sea level.

Rocks Cooling

The process of igneous rocks solidifying and crystallizing from magma or lava as they lose heat.

Oceanic Divergent Boundary

A tectonic plate boundary where two oceanic plates move apart, leading to the formation of new oceanic crust through volcanic activity.