Suppose That the Total Value of Dividends to Be Paid

question 99

Multiple Choice

Suppose that the total value of dividends to be paid by companies in the Narnian stock market index is $100 billion.Investors expect dividends to grow over the long term by 5% annually,and they require a 10% return.Now a collapse in the economy leads investors to revise their growth estimate down to 4%.By how much should market values change?

• A) −16.67%.
• B) zero.
• C) −20%.
• D) +20%.

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Definitions:

Generalized Reciprocity

A form of exchange where goods or services are given with the expectation that the recipient will reciprocate in the future without a specified value or time frame.

Generalized Reciprocity

A type of exchange where goods or services are provided without an immediate or specified return, often found within close relationships or communities.

Close Kin

Family members closely related by blood, typically immediate family such as parents, children, and siblings.

Entrepreneurs

Individuals who create, organize, and operate businesses, taking on greater than normal financial risks in order to do so, often seen as innovators who drive economic growth.