Shield Security Pays Annual Dividends and Has Just Paid This

question 47

Multiple Choice

Shield Security pays annual dividends and has just paid this year's dividend of $1.20.If its equity cost of capital is 10%,and dividends are expected to grow by 5% per year in the future,what is the value of Shield's stock?

• A)$24.00
• B)$25.20
• C)$12.60
• D)$12.00
• E)$26.00

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Definitions:

Estimated Life

The expected duration over which an asset is likely to be useful or productive in its intended operation, used for depreciation purposes.

Straight-Line Depreciation

A method of allocating an asset's cost evenly across its useful life, resulting in the same depreciation expense each year.

Depreciable Cost

The total cost of a tangible asset that can be depreciated over its useful life, excluding salvage value.

Depreciation Expense

Dividing the expense of a material asset throughout its service life.