A Stock Is Expected to Pay $3

question 84

Multiple Choice

A stock is expected to pay $3.20 per share every year indefinitely and the equity cost of capital for the company is 10%.What price would an investor be expected to pay per share next year?

• A)$8.00
• B)$16.00
• C)$24.00
• D)$32.00
• E)$35.20

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Definitions:

MUₐ /Pₐ

Represents the ratio of the marginal utility (MU) of a good to its price (P), indicating the additional satisfaction per unit of currency spent on that good.

Product B

A general term used to refer to a second product or an alternative in a list or comparison of goods.

Income

The financial gain or revenue received by an individual or entity in exchange for providing labor or through investments.

Research and Development

The investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures.