Bill Bailey and Sons Pays No Dividend at the Present

question 22

Multiple Choice

Bill Bailey and Sons pays no dividend at the present time.The company plans to start paying an annual dividend in the amount of €.30 a share for two years commencing two years from today.After that time,the company plans on paying a constant €1 a share dividend indefinitely.Given a required return of 14%,what is the value of this equity?

• A)€4.82
• B)€5.25
• C)€5.39
• D)€5.46
• E)€5.58

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Definitions:

Indorsement

The act of signing the back of a negotiable financial instrument, thereby making it payable to someone other than the named holder.

Signature

A person's name written in a distinctive way as a form of identification in authorizing a document.

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or a designated entity from the drawer's account.

Order Paper

A negotiable instrument that is payable to a specific person or their order, requiring endorsement for transfer.