You Are Evaluating the Purchase of Somners Resources' Ordinary Shares

question 15

Multiple Choice

You are evaluating the purchase of Somners Resources' ordinary shares that just paid a dividend of $1.80.You expect the dividend to grow at a rate of 12%,indefinitely.You estimate that a required rate of return of 17.5% will be adequate compensation for this investment.Assuming that your analysis is correct,what is the most that you would be willing to pay for the ordinary shares if you were to purchase it today? Round to the nearest $.01.

• A)$36.65
• B)$91.23
• C)$51.55
• D)$74.82

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Definitions:

CFO

Chief Financial Officer, an executive responsible for managing the financial actions of a company, including financial planning, risk management, and record-keeping.

CEO

The Chief Executive Officer, the highest-ranking officer in an organization, responsible for major corporate decisions and management leadership.

Ethical Disaster

An occurrence resulting from actions that severely contradict ethical norms, leading to widespread moral or ethical condemnation.

Misconduct

Refers to improper or unacceptable behavior or action, especially by a professional or official position.