You Are Approached About Purchasing a Share of Common Stock

question 32

Multiple Choice

You are approached about purchasing a share of common stock in a company that will definitely go out of business exactly 2 years from today.The company is anticipated to pay a $10 dividend one year from now and a $15 dividend two years from now (immediately before it goes out of business) .What price are you willing to pay for the stock if the required rate of return on the stock is 5%?

• A) $22.68
• B) $23.13
• C) $23.81
• D) $25.00

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Definitions:

Competitive Business Strategies

Approaches undertaken by businesses to gain a competitive edge in the market, focusing on pricing, product differentiation, market segmentation, and customer service.

Market Niche

A focused, targetable portion of a market defined by unique preferences or needs that distinguish it from the market at large.

Service Quality

The degree to which a service meets the customer's expectations and needs, often assessed through dimensions like reliability, responsiveness, assurance, empathy, and tangibles.

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An international luxury hospitality company known for its high-quality standards, exemplary service, and luxury accommodations in destinations around the world.