V1 Suppose that a friend has started a business selling software. The software is a great hit, and the firm quickly grows large enough to be able to sell stock. Your friend'sfirm promises to pay a dividend of $7 per share every year for the next 49 years, at which point your friend intends to shut down the business. The firm's stock iscurrently selling for $65 per share. If you believe that the company really will pay dividends as stated and if you require a rate of return of 13% to make thisinvestment, should you buy the stock?O A. Yes, according to the fundamental value equation, the price will be less than $65.O B. No, according to the fundamental value equation, the price will be less than S65.O C. No, according to the fundamental value equation, the price will be equal to $65.O D. Yes, according to the fundamental value equation, the price will be more than $65.ptsof 1of 1. Next questionSuppose that the price of Goldman Sachs stock is curently $145 per share, You expect that the firm will pay a dividend of $2.26 per share at the end of the year, atwhich time you expect that the stock will be selling for $174 per share.If you require a return of 20% to invest in this stock, youbuy the stock.ptof

Therefore, the correct answer is option B i.e., 'No, according to the fundamental value equation,…

every year for the next 49 years, at which point your friend intends to shut down the business. The firm's stock is rrently selling for $65 per share. If you believe that the company really will pay dividends as stated and if you require a rate of return of 13% to make this vestment, should you buy the stock? O A. Yes, according to the fundamental value equation, the price will be less than S65. B. No, according to the fundamental value equation, the price will be less than S65. O C. No, according to the fundamental value equation, the price will be equal to $65. D. Yes, according to the fundamental value equation, the price will be more than $65.

every year for the next 49 years, at which point your friend intends to shut down the business. The firm's stock is rrently selling for $65 per share. If you believe that the company really will pay dividends as stated and if you require a rate of return of 13% to make this vestment, should you buy the stock? O A. Yes, according to the fundamental value equation, the price will be less than S65. B. No, according to the fundamental value equation, the price will be less than S65. O C. No, according to the fundamental value equation, the price will be equal to $65. D. Yes, according to the fundamental value equation, the price will be more than $65.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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