IBM Expects to Pay a Dividend of $2 Next Year

question 48

Multiple Choice

IBM expects to pay a dividend of $2 next year and expects these dividends to grow at 9% a year. The price of IBM is $80 per share. What is IBM's cost of equity capital?

• A) 9.20%
• B) 10.35%
• C) 10.93%
• D) 11.50%

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Definitions:

Fiduciary Duty

A legal obligation of one party to act in the best interest of another party, such as the duty a trustee has to beneficiaries.

Liability

Refers to the state of being legally responsible for something, such as a debt or obligation.

Agent

An individual or entity authorized to act on behalf of another, typically in a business or legal capacity, entering into agreements or making decisions.

Fiduciary Duties

Obligations one party has to act in the best interest of another party, such as a trustee towards a beneficiary.