Jarrett Corp Management Believes That After 2015 Jarrett Will Grow at a Following

question 60

Multiple Choice

Jarrett Corp.
At the end of 2010 Jarrett Corp.developed the following forecasts of net income:
$\begin{array}{lccc}& \text {Forecasted } \\ \text { Year: }& \text { Net Income} \\2011&\$20, 856\\2012&\$22,733\\2013&\$24,552\\2014&\$27,252\\2015&\$ 29.978\\\end{array}$

Management believes that after 2015 Jarrett will grow at a rate of 7% each year.Total common shareholders' equity was $112,768 on December 31, 2010.Jarrett has not established a dividend and does not plan to paying dividends during 2011 to 2015.Its cost of equity capital is 12%.
-Assume that a firm's book value at the beginning of the year is $17,800 and that the firm reports net income of $6,200.If the firm's book value at the end of the year is $20,000 what was the amount of dividends paid during the year?

• A) $4,000
• B) $8,800
• C) $2,200
• D) Insufficient information to determine

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Definitions:

Population Mean

The average value of a population attribute.

Population Standard Error

The standard deviation of a sampling distribution, measuring the dispersion of sample means around the population mean.

Confidence Interval

A range of values, derived from the statistics of observed data, that is likely to contain the value of an unknown population parameter.

Mean

The average of a set of numbers, calculated by dividing the sum of all values by the number of values.