If a Company Pays a Dividend of $2 to Be

question 127

Multiple Choice

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

• A)$3.40
• B)$28.57
• C)$200.00
• D)$340.00

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Definitions:

Voidable

A term applied to a contract that one or both parties have the ability to either withdraw from or enforce.

Good Title

A legal term indicating that a property title is valid and free of any liens or other encumbrances that might hinder its sale or use.

Fair Market Value

The price at which property would sell on the open market between a willing buyer and a willing seller, each having reasonable knowledge of the relevant facts.

Recourse

Recourse refers to the legal right to demand compensation or payment from an individual or entity responsible for a loss, debt, or other obligation.