Lakeside Sheet Metal Is Downsizing and Plans on Completely Closing

question 6

Multiple Choice

Lakeside Sheet Metal is downsizing and plans on completely closing 3 years from now. The firm's liquidation plan calls for annual dividends of $2, $4, and $35 over the next 3 years, respectively. What is the current value of this stock given a discount rate of 14 percent?

• A) $26.94
• B) $27.16
• C) $28.46
• D) $31.83
• E) $36.29

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Definitions:

Risk Impacts

The potential negative consequences that uncertain events or conditions may have on an organization's ability to achieve its objectives.

Market Risk

Market risk is the potential for an investor to experience losses due to factors that affect the overall performance of the financial markets.

Business-specific Risk

The risk associated with the particular circumstances of a specific business, including its industry, market position, and management.

SML

Stands for Security Market Line, which represents the expected return of a market security as a function of its systematic, non-diversifiable risk.