Wyatt Oil Presently Pays No Dividend

question 42

Multiple Choice

Wyatt oil presently pays no dividend.You anticipate Wyatt Oil will pay an annual dividend of $0.56 per share two years from today and you expect dividends to grow by 4% per year thereafter.In Wyatt Oil's equity cost of capital is 12%,then the value of a share of Wyatt oil today is:

• A) $4.67
• B) $5.00
• C) $6.25
• D) $7.00

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Definitions:

Government Patents

Legal rights granted by the government to inventors for their inventions, giving them an exclusive right to use, make, and sell the invention for a certain period.

Imitation Problem

The challenge businesses face when competitors copy their products or services, potentially reducing the original company's profits and market share.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a utility equal to its cost of production.

Technological Advance

The progress or development in technology, leading to new products, processes, or systems.