Galloway, inc., just paid a dividend of $3 per share and has announced that it will increase its dividend by $1 per share for each of the next 4 years, and then never pay another dividend. what is the current per share value at a required return of 12.7 percent?

(a) $20.08
(b) $21.15
(c) $16.02
(d) $18.60
(e) $17.33

(C) $16.02

Explanation:

Current per share value at required return of 12.7 percent

=($4/(1+0.127))+($5/(1+0.127)2 )+($6/(1+0.127)3)+($7/(1+0.127)4

=$ 16.02 ((C) $16.02)

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

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