A Firm Plans on Paying a Constant Dividend of $2

question 66

Multiple Choice

A firm plans on paying a constant dividend of $2 per share into the foreseeable future.If investors seek a 12% return to hold the firm's stock,what is fair value for the company's stock?

• A) $13.67
• B) $15.67
• C) $16.67
• D) $18.67

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Definitions:

Diffusion Curve

A graphical representation showing the rate and pattern of adoption of a new product, technology, or idea over time among members of a social system.

Maturity Phase

A stage in the product life cycle where sales growth stabilizes, and the product is well established in the market, facing increased competition.

Market Segments

The process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics.

New-To-The-World

Products or services that create an entirely new market by being the first of their kind.