Valorous Corporation Will Pay a Dividend of $1

question 31

Multiple Choice

Valorous Corporation will pay a dividend of $1.75 per share at this year's end and a dividend of $2.35 per share at the end of next year. It is expected that the price of Valorous' stock will be $41 per share after two years. If Valorous has an equity cost of capital of 9%, what is the maximum price that a prudent investor would be willing to pay for a share of Valorous stock today?

• A) $32.38
• B) $36.19
• C) $38.09
• D) $39.99

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Definitions:

Behavior Therapy

Systematic application of the principles of learning to the direct modification of a client’s problem behaviors.

Psychodynamic Therapy

A type of psychotherapy that is based on Freud’s thinking and assumes that psychological problems reflect early childhood experiences and internal conflicts.

Cognitive Therapy

A form of psychotherapy that addresses maladaptive patterns of thought to alleviate psychological stress and disorders.

Excessive Guilt

A heightened state of feeling responsible or regretful for a perceived or real wrongdoing, often beyond what is considered rational or justified.