Matilda Industries Pays a Dividend of $2

question 44

Multiple Choice

Matilda Industries pays a dividend of $2.25 per share and is expected to pay this amount indefinitely.If Matilda's equity cost of capital is 12%,which of the following would be expected to be closest to Matilda's stock price?

• A)$12.25
• B)$14.65
• C)$18.75
• D)$21.98

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Definitions:

Effective Annual Rate

The interest rate on an investment or loan on an annual basis, taking compounding into account, providing a true reflection of financial returns or costs.

Effective Annual Rate

The interest rate on an investment or loan that considers compounding over a specified period, usually yearly.

Nominal Rate

The interest rate unadjusted for inflation, expressing the literal annual cost of credit or return on investment.

Nominal Rate

The reported percentage rate without taking inflation into account, representing the actual yearly cost of funds to the borrower.