A Stock Is Expected to Pay $1

question 30

Multiple Choice

A stock is expected to pay $1.25 per share every year indefinitely and the equity cost of capital for the company is 7.5%.What price would an investor be expected to pay per share ten years in the future?

• A)$16.67
• B)$25.01
• C)$33.34
• D)$41.68
• E)$12.50

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Definitions:

Respective Weights

The individual importance or influence assigned to different factors or variables in a calculation, decision-making process, or model.

Representative

Someone who acts on behalf of another person or group, or an example that typifies or stands for a larger group or class.

American Teens

Adolescents who are citizens or residents of the United States, typically characterized by their experiences within American culture.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases.