Beta Corp Has an ROE of 15%; Has Just Paid

question 71

Multiple Choice

Beta Corp has an ROE of 15%; has just paid a dividend of $1.50; a pays 10% of its earnings out in dividends,and the appropriate discount rate is 20%; what is the current stock price?

• A) $ 7.50
• B) $ 26.19
• C) $ 11.35
• D) $ 31.43

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Definitions:

Arithmetic Sequence

A sequence of numbers in which each term after the first is obtained by adding a constant to the preceding term.

Common Difference

The gap between consecutive numbers in an arithmetic progression.

Partial Sum

The sum of a specified sequence of terms up to a certain number in the sequence.

Negative Exponent

Indicates that the base of the exponent should be reciprocated and the exponent made positive.