You Want to Purchase Some Shares of Green World Stock

question 105

Multiple Choice

You want to purchase some shares of Green World stock but need a 15 percent rate of return to compensate for the perceived risk of such ownership.What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $0.90 annual dividend per share?

• A)$5.40
• B)$6.00
• C)$6.90
• D)$7.20
• E)$7.80

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Definitions:

Unlevered Cost

The cost of an investment or project without the inclusion of debt, representing the underlying cost to equity holders.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary according to income or profits.

Coupon

The interest rate paid by a bond, typically expressed as a percentage of the bond's face value.

Unlevered Cost

It involves the cost of funding a project or investment without any debt, reflecting the cost of capital that is equity financed.