Northern Railways Has a Current Stock Price of $56

question 27

Multiple Choice

Northern Railways has a current stock price of $56.75 and is expected to pay a dividend of $1.15 in one year.If Northern's equity cost of capital is 12%,what price would Northern's stock be expected to sell for immediately after it pays the dividend?

• A)$57.65
• B)$63.56
• C)$62.41
• D)$57.78
• E)$55.60

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Definitions:

Consuming Goods

The action of using up goods or products, thereby reducing inventory.

Generating Revenues

The process by which a company earns income through the sale of goods or services.

Expenses

Outflows or using up of assets, or incurring liabilities, as a result of operational activities intended to generate revenue.

Financial Statement

A summary report that quantitatively describes the financial health of a company, including balance sheets, income statements, and cash flow statements.