USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 135

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds falls to 8 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 15 percent return. The return on equity will be 12 percent.
-Refer to Exhibit 9.2. To what price will the market rise if the earnings expectation is $32.00?

• A) $384.00
• B) $266.56
• C) $213.44
• D) $200.00
• E) $125.44

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Definitions:

Task Difficulty

Refers to the level of challenge presented by a task, with the degree of difficulty affecting how an individual or group performs.

Informational Influence

The change in beliefs or behavior that occurs when an individual accepts information from others as evidence about reality.

Napkin

A piece of cloth or paper used at the table for wiping the mouth and fingers while eating.

Line Study

A research method involving the analysis of lines in visual artworks or diagrams for scientific or educational purposes.