Use the Information for the Question(s)below

question 44

Multiple Choice

Use the information for the question(s) below.
The JRN Corporation will pay a constant dividend of $3 per share per year in perpetuity.Assume that all investors pay a 20% tax on dividends and that there is no capital gains tax.The cost of capital for investing in JRN stock is 12%.
-The WTC Corporation will pay a constant dividend of $3.20 per share,per year,in perpetuity.If all investors pay a 15% tax on dividends,there is no capital gains tax,and the cost of capital for investing in WTC stock is 9%,what is the price for a share of WTC stock?

• A)$30.22
• B)$26.67
• C)$18.77
• D)$16.45

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Definitions:

Implied Covenant

A legal concept that infers certain promises or conditions in a contract even though they are not expressly stated.

Good Faith

The honest intention to act without taking an unfair advantage over another party in a transaction.

Unemployment Compensation

Financial payments made to individuals who have lost their jobs, intended to support them financially while they seek new employment.

Human Resources

The department within a business that is responsible for all things worker-related, including recruitment, training, and compliance.