Increase the present value of annuity

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1. Gout Shoes Inc pays dividends annually and has an active share repurchase program. Gout makes all of its payouts at the end of each year and its year-end was yesterday. Today, Gout’s share price is $34.33 and there are 100 million shares outstanding. Shareholders require a return of 9% and analysts expect Gout’s payouts to grow in perpetuity at an annual rate of 3%. What are next year’s total payouts?

A) $202 million B) $203 million C) $204 million D) $205 million E) *$206 million

2. Which of the following will increase the present value of an annuity, other things equal?

A) Increasing the interest rate

B) Decreasing the interest rate

C) Decreasing the number of payments

D) Decreasing the amount of the payment

Reference no: EM132036805

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