Best Value Outlet Recently Announced That It Intends to Pay

question 54

Multiple Choice

Best Value Outlet recently announced that it intends to pay dividends of $0.40,$0.60,$0.75,and $1.00 per share over the next four years,respectively.After that,the plan is to increase the dividend by 3.5 percent annually.What is the current value of this stock if the applicable discount rate is 13.5 percent?

• A) $6.44
• B) $7.83
• C) $8.17
• D) $9.55
• E) $13.10

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Definitions:

Current-Year Dividends

Dividends that are declared and paid to shareholders from the profits made by the company within the current fiscal year.

Common Stockholders

Common stockholders are individuals or entities that own shares of common stock in a company, granting them rights to vote on corporate matters and receive dividends.

Authorized Shares

The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation.

Issued Shares

The total number of shares that a corporation has legally sold to investors, including those held by the public and the company's officers or insiders.