Last Week,Railway Cabooses Paid Its Annual Dividend of $1

question 70

Multiple Choice

Last week,Railway Cabooses paid its annual dividend of $1.20 per share. The company has been reducing the dividends by 10% each year. How much are you willing to pay to purchase stock in this company if your required rate of return is 14%?

• A) $4.50
• B) $7.71
• C) $10.80
• D) $15.60
• E) $27.00

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Definitions:

Corporate Governance

The system of rules, practices, and processes through which a company is directed and controlled, focusing on balancing the interests of its various stakeholders.

American Law

The legal system of the United States, including its statutes, regulations, case law, and constitutional provisions.

Insider Trading

The unlawful activity where individuals trade on the stock market for personal gain using private, sensitive information.

Business Judgment Rule

A legal principle that protects the decisions of a corporate board of directors from judicial review as long as those decisions are made within their authority and with a reasonable belief that they were in the best interests of the company.