Praetorian Industries Will Pay a Dividend of $2

question 101

Multiple Choice

Praetorian Industries will pay a dividend of $2.50 per share this year and has an an equity cost of capital of 8%.Praetorian's stock is currently trading at $84 per share.By comparing Praetorian with similar firms,an investor expects that its dividends will grow by up to 5% per year.What is the best next step that the investor should take regarding Praetorian's stock?

• A)Sell any Praetorian stock that she owns.
• B)Short Praetorian's stock.
• C)Revise Praetorian's equity cost of capital.
• D)Revise her estimate of Praetorian's dividend growth.
• E)Compare Praetorian's equity cost of capital with similar firms.

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Definitions:

Indexes

Statistical composite measures that track changes in economic conditions or markets, made up of selected data points from various sources.

Forecasting

The process of making predictions about future events based on historical and current data.

Autoregressive Forecasting Model

A type of time series model that predicts future values based on past values using a linear regression of one or more lagged variables.

Historical Analogy

Historical Analogy involves using historical events as a reference to understand and predict future or current events, based on assumed similarities.