Sure Tool Company Is Expected to Pay a Dividend of $2

question 96

Multiple Choice

Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. Analysts expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure Tool Company's stock is 1.25. What is the intrinsic value of Sure's stock today?

• A) $20.60
• B) $20.00
• C) $12.12
• D) $22.00

---

Definitions:

Unamortized Purchase Discrepancy

The portion of the purchase price that has not yet been allocated or amortized over the assets acquired in a transaction.

Equity Method

An accounting principle used for incorporating the investor's share of associates' profits or losses, contributing to the investor's book value of the investment.

Shareholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing the owners' claim on the business.

Cash Consideration

The amount of cash that is paid or received during transactions, such as acquisitions or sales of assets.