A Stock Currently Sells for $25 Per Share and Pays

question 7

Multiple Choice

A stock currently sells for $25 per share and pays $0.24 per year in dividends.What is an investor's valuation of this stock if she expects it to be selling for $30 in one year and requires a 15 percent return on equity investments?

• A) $30.24
• B) $26.30
• C) $26.09
• D) $27.74

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Definitions:

Credits

Entries that decrease assets or increase liabilities and equity on a company's balance sheet, reflecting the accounting principle of double-entry bookkeeping.

Ending Owner's Equity

Ending Owner's Equity represents the final amount of owner's equity in a business at the conclusion of an accounting period, after accounting for all additions and deductions.

Withdrawals

Withdrawals typically refer to amounts of money taken out from a bank account, but in business, it can also mean money taken out by the owner for personal use, reducing the capital account.

Net Income

The total revenue minus total expenses, indicating the company’s profit or loss over a specific accounting period.