The Back Room Just Paid an Annual Dividend of $1

question 79

Multiple Choice

The Back Room just paid an annual dividend of $1.65 a share.The firm expects to pay dividends forever and to increase the dividend by 3 percent annually.What is the expected value of this stock five years from now if the discount rate is 14 percent?

• A)$17.39
• B)$17.91
• C)$18.06
• D)$18.52
• E)$19.08

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Definitions:

Rationalization

A defense mechanism in which controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.

REBT

Rational Emotive Behavior Therapy; a psychotherapeutic approach that helps individuals identify, challenge, and change irrational beliefs that lead to emotional distress.

Irrational Beliefs

Thoughts or convictions not based on reason or logic, often leading to psychological distress; identified as a key target in cognitive behavioral therapies.

Dysfunctional Attitudes

Persistent negative thoughts and beliefs that can lead to emotional or behavioral problems.