IBM Expects to Pay a Dividend of $2 Next Year

question 48

Multiple Choice

IBM expects to pay a dividend of $2 next year and expects these dividends to grow at 9% a year. The price of IBM is $80 per share. What is IBM's cost of equity capital?

• A) 9.20%
• B) 10.35%
• C) 10.93%
• D) 11.50%

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Definitions:

Limited Partnership

A partnership consisting of at least one general partner, who manages the business and is personally liable for debts, and one or more limited partners, who invest but do not participate in management.

Partnership Interest

The share or portion of a partnership owned by one of the partners, including rights to its profits.

Capacity at Law

The ability of an entity or individual to enter into legally binding contracts and to sue or be sued.

Shares in Property

Refers to the ownership interest or equity that individuals can have in real estate or other forms of property, often implying joint ownership or investment.