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:

Liquidity Premiums

Additional returns investors demand for holding securities that are not easily convertible to cash without a loss in value.

Mispricing

The occurrence when the market price of an asset does not accurately reflect its intrinsic value, possibly due to information asymmetry, market inefficiency, or other factors.

Extraneous Risk

External risk beyond the control of investors or the company, not directly related to the investment's or company's specific activities.

General Market Exposure

The extent to which an investment or portfolio is subject to fluctuations in the overall market.