How Much Would You Pay for a Share of Stock

question 44

Multiple Choice

How much would you pay for a share of stock today if you expect it will pay a dividend of $2.50 each year and will sell for $58 two years from now? Assume your required rate of return on this stock is 13 percent.

• A) $60.50
• B) $55.50
• C) $53.54
• D) $49.59

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Definitions:

Purchase Discounts

Reductions in price given by suppliers for early payment or bulk purchasing.

Controlling Account

A general ledger account that summarizes the total balances of several subsidiary accounts.

Accounts Payable

Liabilities to suppliers or creditors for items or services purchased on credit.

Merchandise Inventory

The total cost of all the goods owned by a company that are intended for sale, during a particular accounting period.