The Nikko Company's Last Dividend Was $1

question 17

Multiple Choice

The Nikko Company's last dividend was $1.50.The dividend growth rate is expected to be constant at 15% for 3 years,after which dividends are expected to grow at a rate of 6% forever.If Nikko's required return (r_s) is 11%,what is the company's current share price?

• A)$36.69
• B)$37.82
• C)$38.99
• D)$40.20

---

Definitions:

Maturity Matching Principle

A financial strategy that involves matching the maturities of assets and liabilities to reduce risk in managing working capital and financing.

Revolving Credit Agreement

A Revolving Credit Agreement is a financial arrangement which allows the borrower to withdraw, repay, and redraw loans repeatedly up to a certain credit limit.

Commitment Fee

A fee charged by a lender to a borrower for an agreed-upon loan or line of credit that has not yet been utilized.

Self-Liquidating Debt

A type of short-term loan that is used to finance a project or inventory that will generate enough income to pay back the loan.