What Would Be the Maximum an Investor Should Pay for the Ordinary

question 92

Multiple Choice

What would be the maximum an investor should pay for the ordinary equity of a firm that has no growth opportunities but pays a dividend of €1.36 per year? The next dividend will be paid in exactly 1 year.The required rate of return is 12.5%.

• A)€9.52
• B)€10.88
• C)€12.24
• D)€17.00
• E)None of the above.

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Definitions:

Affordable Method

A promotion-mix budgeting strategy in which firms set their promotion budget based on what they believe they can afford.

Promotional Budget

The allocation of financial resources dedicated to marketing and advertising activities over a specified period.

Promotional Message

Communication designed to inform, persuade, or remind potential buyers about a product or service, often as part of a broader marketing strategy.

Target Market

A specific group of consumers at which a product or service is aimed, defined by demographic, geographic, and psychographic characteristics.