The Last Dividend Paid by New Technologies Was an Annual

question 3

Multiple Choice

The last dividend paid by New Technologies was an annual dividend of $1.40 a share.Dividends for the next 3 years will be increased at an annual rate of 8 percent.After that,dividends are expected to increase by 3 percent each year.The discount rate is 16 percent.What is the current value of this stock?

• A) $10.40
• B) $12.60
• C) $13.33
• D) $14.10
• E) $15.55

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Definitions:

Partnership

The association of two or more persons who act as co-owners of a business.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting its true value under normal market conditions.

Equipment

Equipment consists of the tools, machinery, and other durable assets used by a business to carry out its operations.

Cash

Money in the form of currency, including coins and banknotes, which is used as a medium of exchange and legal tender.