Fristy Corporation Has a Book Value of Equity of $5,000

question 57

Multiple Choice

Fristy Corporation has a book value of equity of $5,000 at the beginning of 2005, and net income of $1,000 for year ended 2005. It pays no dividends and its cost of equity capital is 10%. It expects return on beginning of year equity to remain constant for 2006 and 2007 and decrease to 10% thereafter. What should its price to book value be at the end of 2005 (pick closest number) ?

• A) 1.0
• B) 1.05
• C) 1.09
• D) 1.19

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Definitions:

Triple Bottom Line

An accounting framework that incorporates three dimensions of performance: social, environmental, and financial.

Wicked Problem

A complex, difficult to define issue without a clear solution and with interconnected elements.

Fully Solved

A situation or problem that has been resolved or addressed completely, leaving no outstanding issues.

Social Problems

Refers to societal issues that negatively impact individuals or groups within a community, requiring collective solutions.