Coolibah Holdings Is Expected to Pay Dividends of $1

question 57

Multiple Choice

Coolibah Holdings is expected to pay dividends of $1.20 every six months for the next three years. If the current price of Coolibah stock is $22.60, and Coolibah's equity cost of capital is 18%, what price would you expect Coolibah's stock to sell for at the end of three years?

• A) $28.87
• B) $31.76
• C) $33.20
• D) $34.64

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Definitions:

Price Floor

A government-imposed limit on how low a price can be charged for a product or service.

Price Floors

A government- or authority-imposed minimum price that can be charged for a commodity, which is typically set above the equilibrium price to protect producers.

Consumer Surplus

The gap between what consumers are prepared to pay for a product or service, and what they end up spending.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive, due to market price.