The Last Dividend Paid by New Technologies Was an Annual

question 3

Multiple Choice

The last dividend paid by New Technologies was an annual dividend of $1.40 a share.Dividends for the next 3 years will be increased at an annual rate of 8 percent.After that,dividends are expected to increase by 3 percent each year.The discount rate is 16 percent.What is the current value of this stock?

• A) $10.40
• B) $12.60
• C) $13.33
• D) $14.10
• E) $15.55

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Definitions:

Free-rides

The situation where individuals consume a public good without contributing to its cost, benefiting from others' contributions.

Common Resource

A natural or man-made resource where one user's consumption reduces or diminishes the utility of that resource for others, and where it is difficult to exclude anyone from using the resource.

Rival

Refers to a competitor within the same market that offers similar products or services.

Nonexcludable

A nonexcludable good or service is one where it is impossible, or highly costly, to prevent someone from benefiting from it, regardless of whether they have contributed towards it, such as public parks or national defense.