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:

Return On Equity

A financial ratio that measures the profitability of a corporation in relation to stockholders' equity, indicating how well the company uses investments to generate earnings growth.

ROCE

Return on Capital Employed; a financial ratio that measures a company's profitability and the efficiency with which its capital is used.

Financial Flexibility

The ability of an organization to adapt its financing and investment strategies in response to changes in the marketplace or its own operations.

Fiscal Stress

A situation in which a government struggles to meet its financial commitments or to balance its budget.