ABC Inc Has Announced Today That They Are Going Out of of Business

question 93

Multiple Choice

ABC Inc. has announced today that they are going out of business. As of today, no more regular dividends will be paid. The intention of the firm is to pay two liquidating dividends. The first dividend will be paid one year from now in the amount of $20 a share. The second and final dividend will be paid two years from now at an estimated $13 a share. What is the value of this stock to you today if you feel the appropriate discount rate is 16%?

• A) $21.14
• B) $24.52
• C) $26.90
• D) $28.45
• E) $31.21

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Definitions:

Tickets In Advance

The act of purchasing admission to an event before the actual date, often utilized to ensure entry or secure a preferred seating.

Economic Models

Simplified representations of complex economic processes, used to predict future economic behaviors and outcomes.

Entrepreneurship

The activity of setting up a business, taking on financial risks in the hope of profit.

Implicit Costs

The opportunity costs of resources already owned by the firm and used in business, for which no cash payment is made.