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Consider a Share of Stock in a Company That Will

Question 3

Multiple Choice

Consider a share of stock in a company that will pay a dividend of $20 one year from today and immediately liquidate its assets. Your expected share of the liquidated assets is $5. Your time value of money is such that you consider $1.05 a year from today is equivalent to $1.00 today. What is the maximum you would be willing to pay for a share of stock in this company?


A) $17.39
B) $20.00
C) $23.81
D) $25.00

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