Considered as the advantage of payback period

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Reference no: EM131859739

1. Suppose that a shareholder has just paid $4 per share for Go Go Company shares. The shares will pay a $0.20 per share dividend in the upcoming year, and this dividend is expected to grow at an annual rate of 8% indefinitely. What is the annual required rate of this shareholder?

a. The annual required rate of this shareholder is 13%.

b. The annual required rate of this shareholder is 5%.

c. The annual required rate of this shareholder is 8%.

d. None of the other answers are true.

2. Which of the following is not considered as the advantage of payback period?

a. Biased against long-term projects, such as new projects and research and development.

b. Adjusts for uncertainty of later cash flows.

c. Biased toward liquidity.

d. Easy to understand.

Reference no: EM131859739

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