WSU Inc Is a Young Company That Does Not Yet Pay

question 62

Multiple Choice

WSU Inc. is a young company that does not yet pay a dividend. You believe that the company will begin to pay dividends 5 years from now, and that the company will then be worth $50 per share. If your required rate of return on this risky stock is 20%, what is the stock worth today?

• A) $40
• B) $10
• C) $20.09
• D) $0.00

---

Definitions:

Checkable Deposits

Bank accounts that allow the account holder to write checks or use electronic debit to access funds, including both checking and demand deposit accounts.

Federal Reserve Notes

The physical banknotes issued by the Federal Reserve, serving as the national currency of the United States.

Paper Money

Currency issued by a government or central bank in the form of paper notes and used as legal tender for transactions.

Goldsmiths

Historically, craftsmen who made and traded gold items, but also pivotal in the development of banking as they stored and lent money.