Predictable Corp Has Increased Its Annual Dividend Each Year of Its

question 73

Multiple Choice

Predictable Corp has increased its annual dividend each year of its life by 2% (and will continue to do so indefinitely) .If Predictable paid its annual dividend yesterday of $8 and the cost of capital is currently 4%,then by what amount will the stock price decrease by if the cost of capital increases to 5%?

• A) $408.00
• B) $272.00
• C) $136.00
• D) none of the above

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Definitions:

Exchange Rates

The value of one currency expressed in terms of another currency, used in international trade and investment.

Nominal Currency Values

The face value of currency without taking into account inflation or the purchasing power of the currency.

Purchasing Power

The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy, often impacted by inflation.

Fixed Exchange Rates

A currency system where the value of a country's currency is pegged at a fixed rate to another currency or a basket of currencies, making it stable against those currencies.