What Would Be the Maximum an Investor Should Pay for the Common

question 2

Multiple Choice

What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a dividend of $2.50 per year? The next dividend will be paid in exactly 1 year.The required rate of return is 11%.

• A)$19.52
• B)$21.50
• C)$22.73
• D)$25.22
• E)None of the above.

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Definitions:

Penalty

A punishment imposed for breaking a law, rule, or contract.

Budget

A budget is a financial plan that outlines expected income and expenses over a specified period, helping to manage resources effectively.

Cut Expenses

The act of reducing spending or costs in order to save money or meet a budget.

Living On A Budget

The practice of managing income and expenses with a planned, structured approach to ensure financial sustainability.