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:

Fixed Assets

Tangible assets, such as buildings and machinery, used in the operation of a business and not expected to be consumed or converted into cash in the short term.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its separable net assets.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its operations.

Long-Term Debt

Financial obligations of a company that are due more than one year in the future.