USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 41

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that the dividend payout ratio will be 45 percent when the rate on long-term government bonds falls to 9 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 16 percent return. The return on equity will be 14 percent.
-Refer to Exhibit 9.4. To what price will the market rise if the earnings expectation is $10.00?

• A) $71.40
• B) $66.30
• C) $54.20
• D) $77.00
• E) $51.10

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Definitions:

Endosteum

A thin vascular membrane lining the inner surface of the bony tissue that forms the medullary cavity of long bones.

Osteoblasts

Bone-forming cells involved in the synthesis and mineralization of bone during both initial bone formation and later bone remodeling.

Sharpey Fibers

Thick collagen fibers that anchor periosteum (the outer fibrous layer of bone) to the bone, playing an important role in the attachment of tendons and ligaments to bones.

Periosteum

A dense layer of vascular connective tissue enveloping bones except at the surface of the joints.