General Importers Announced Today That Its Next Annual Dividend Will

question 30

Multiple Choice

General Importers announced today that its next annual dividend will be $2.60 per share.After that dividend is paid,the company expects to encounter some financial difficulties and is going to suspend dividends for five years.Following the suspension period,the company expects to pay a constant annual dividend of $1.30 per share.What is the current value of this stock if the required return is 18 per cent?

• A)$3.55
• B)$4.88
• C)$4.27
• D)$3.01
• E)$3.89

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Definitions:

Financial Statements

Financial statements are formal records that outline the financial activities and conditions of a business, individual, or other entity, typically including the balance sheet, income statement, and statement of cash flows.

Contingency

An existing condition or situation whose outcome is uncertain and will be confirmed only upon the occurrence or non-occurrence of one or more uncertain future events.

IFRS

A global set of accounting standards formulated by the International Accounting Standards Board (IASB), known as International Financial Reporting Standards.