Business Solutions Is Expected to Pay Its First Annual Dividend

question 57

Multiple Choice

Business Solutions is expected to pay its first annual dividend of $.84 per share in Year 3. Starting in Year 6, the company plans to increase the dividend by 2 percent per year. What is the value of this stock today, Year 0, at a required return of 14.4 percent?

• A) $5.01
• B) $8.09
• C) $8.29
• D) $7.03
• E) $9.34

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Definitions:

Short Hedger

An investor who enters into futures contracts to protect against potential price declines in an asset they hold.

Futures Price

The agreed-upon price for the sale/purchase of an asset at a future date, as determined in a futures contract.

Metals

Elements that are typically hard, shiny, malleable, fusible, and ductile, with good electrical and thermal conductivity, used in a wide range of industrial and decorative applications.

Energy Currency

This term is often used to describe the primary unit of energy that is spent or exchanged within a biological or ecological system, or in economics to compare energy costs across different types of energy.