You Are Evaluating the Purchase of Holdings,Inc

question 44

Multiple Choice

You are evaluating the purchase of Holdings,Inc.common stock that just paid a dividend of $1.80,and the dividend will be $1.80 per share per year for the next ten years.You plan to hold the stock for three years and then sell it.You expect the price of the company's stock to rise to $51.50 at the end of your three-year holding period.You estimate that a required rate of return of 17.5% will be adequate compensation for this investment.Calculate the present value of the expected future stock price.Round to the nearest $.25.

• A)$64.00
• B)$55.25
• C)$31.75
• D)$103.00

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Definitions:

Market Level

The average or prevailing price of goods, services, or wages within a specific market or industry.

Employer

An individual or entity that hires and pays for the services of workers.

Employees

Individuals who are hired by a firm or organization to perform specific tasks and duties in exchange for compensation.

Market Pay Policy

A compensation strategy based on the prevailing wage rates within an industry or geographic location for similar jobs, aiming to attract and retain talent by offering competitive salaries.