PV of Dividends: Next Year Jenkins Traders Will Pay a Dividend

question 77

Multiple Choice

PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the next four years?

• A) $13.50
• B) $9.72
• C) $12.50
• D) $11.63

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service volume, such as raw materials and direct labor expenses.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to assess the profitability of an investment.

Monthly Interest Rate

The percentage of interest that is charged or earned on a loan or investment over a month.

Materials Requirements Planning

A system used in manufacturing to calculate materials needed for production, ensuring the right materials are available at the right time and in the correct quantities.