Use the Information for the Question(s)below

question 78

Multiple Choice

Use the information for the question(s) below.
Von Bora Corporation is expected to pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year.You expect Von Bora's stock price to be $25.00 at the end of two years.Von Bora's equity cost of capital is 10%.
-The price you would be willing to pay today for a share of Von Bora stock,if you plan to hold the stock for two years is closest to:

• A)$23.15.
• B)$20.65.
• C)$21.95.
• D)$21.90.

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Definitions:

Example

An instance or case that is representative of a concept or demonstrates a particular situation or principle.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period.

Annual Revenue

The total amount of money earned from the sale of goods or services in a fiscal year before any expenses are subtracted.

Annual Expenses

The total amount of money spent or costs incurred by a business or individual in a one-year period.