You Are Considering the Purchase of XYZ Company's Ordinary Shares

question 112

Multiple Choice

You are considering the purchase of XYZ Company's ordinary shares which will pay a $1.00 per share dividend one year from the date of purchase.The dividend is expected to grow at the rate of 4% per year.If the appropriate discount rate for this investment is 14%,what is the price of one share of XYZ?

• A)$7.14
• B)$10.00
• C)$25.00
• D)Cannot be determined without maturity date

---

Definitions:

Low-Risk Investment

An investment that is generally considered safer, with a lower chance of losing principal but typically offering lower returns.

Creditor

An entity or person that lends money or extends credit to another party, expecting to be repaid, usually with interest.

Investment

The action of dispensing resources, often capital, with a view towards gaining profit or income.

College Education

College education is the stage of learning that occurs at universities and colleges, often leading to an undergraduate or graduate degree.