A Firm Does Not Pay a Dividend

question 86

Multiple Choice

A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

• A) $4.42
• B) $4.59
• C) $5.43
• D) $7.21

---

Definitions:

Mineral Water

Water that contains minerals or other dissolved substances that alter its taste or give it therapeutic value, usually obtained from wells or springs.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers.

Marginal Cost

The added cost of producing one additional unit of a product or service.

Mineral Water

A type of water that contains various minerals and is often bottled and sold for consumption.