High Tech Chip Company Paid a Dividend Last Year of $2.50.The

question 59

Multiple Choice

High Tech Chip Company paid a dividend last year of $2.50.The expected ROE for next year is 12.5%.An appropriate required return on the stock is 11%.If the firm has a plowback ratio of 60%,the dividend in the coming year should be

• A)$1.00
• B)$2.50
• C)$2.69
• D)$2.81
• E)none of the above

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Definitions:

Marginal Analysis

The comparison of marginal (“extra” or “additional”) benefits and marginal costs, usually for decision making.

Marginal Benefits

The uplift in utility or enjoyment gained through consuming or producing an added unit of a good or service.

Marginal Costs

The added cost incurred when one more unit of a good or service is produced.

Marginal Benefit

The additional pleasure or utility gained when one more unit of a good or service is consumed.