Antiquated Products Corporation Produces Goods That Are Very Mature in Their

question 12

Multiple Choice

Antiquated Products Corporation produces goods that are very mature in their product life cycles. Antiquated Products Corporation is expected to pay a dividend in year 1 of $1.00, a dividend of $0.90 in year 2, and a dividend of $0.85 in year 3. After year 3, dividends are expected to decline at a rate of 2% per year. An appropriate required rate of return for the stock is 8%. The stock should be worth

• A) $8.98.
• B) $10.57.
• C) $20.00.
• D) $22.22.

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Definitions:

Share Issuance

The process by which a company issues new shares of stock to investors or shareholders, increasing the number of outstanding shares.

Share Buy-backs

The process by which a company purchases its own shares from the marketplace, reducing the amount of outstanding stock on its balance sheet.

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, thus having an ownership interest in the company.

Regulations

Rules and guidelines issued by governmental agencies to control or direct the conduct of activities.