The Double Dip Co

question 37

Multiple Choice

The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus,the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. After that,it will maintain a constant dividend of $1 a share. Two weeks ago,the company paid a dividend of $1.40 per share. What is this stock worth if you require a 9% rate of return?

• A) $10.86
• B) $11.11
• C) $11.64
• D) $12.98
• E) $14.23

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Definitions:

Hot Dogs

Cooked sausages, traditionally grilled or steamed and served in a sliced bun as a sandwich.

Absolute Advantage

The ability of an individual, firm, or country to produce more of a good or service with the same amount of resources compared to others.

Absolute Advantage

The capacity of a person, company, or nation to generate a greater quantity of a product or service using an identical quantity of inputs as compared to competitors.

Broccoli

A green plant from the cabbage family, known for its nutritional benefits and widely consumed as a vegetable.