The Correct Price of a Share with a Cost of Capital

question 24

Multiple Choice

The correct price of a share with a cost of capital of 25% p.a.that pays $0.28 p.a.dividends in perpetuity is:

• A) \( \$ 1.12 \)
• B) \( \$ 1.20 \)
• C) \( \$ 0.89 \)
• D) \( \$ 0.07 \)

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Definitions:

Bearer

Refers to an individual or entity in possession of a negotiable instrument, such as a check or bond, that is payable to whoever holds it.

Payable

Due for payment; a financial obligation that one party has to pay to another.

Issued

The act of officially distributing or making something available, often used in contexts like the issuance of currency, stocks, or legal documents.

Checks

Written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer or named party.