A Stock Is Expected to Pay $1

question 27

Multiple Choice

A stock is expected to pay $1.25 per share every year indefinitely and the equity cost of capital for the company is 8.4%. What price would an investor be expected to pay per share ten years in the future?

• A) $14.88
• B) $22.32
• C) $29.76
• D) $37.20

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Definitions:

Payout

The process of distributing financial rewards, such as dividends or winnings.

Performance-Based Pay

A compensation system in which an employee’s financial remuneration is directly linked to their performance or productivity.

Advantages

The favorable positions or conditions gained by a person or organization that provide a better opportunity for success.

Disadvantages

Negative or unfavorable aspects and conditions that hinder success or effectiveness.