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Basic Question 12 of 16
Last year, Flower Buds had equity accounts as follows:
Retained Earnings: $12,000
Total Shareholder's Equity: $72,000
Projected income is $72,000 and a $0.50 dividend per share is to be paid immediately.
B. $54,000
C. $114,000
Common Stock ($1 Par Value): $60,000
Retained Earnings: $12,000
Total Shareholder's Equity: $72,000
Projected income is $72,000 and a $0.50 dividend per share is to be paid immediately.
What will be the ending retained earnings account?
A. $42,000
B. $54,000
C. $114,000
User Contributed Comments 2
| User | Comment |
|---|---|
| Indira | Ending RE = Beg RE + NI - DIV 12,000+72,000-0.5(60,000)=54,000 |
| Inaganti6 | Now only if the real exam had questions this easy. |
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Learning Outcome Statements
explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models
calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate
identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate
explain advantages and disadvantages of each category of valuation model
CFA® 2025 Level I Curriculum, Volume 3, Module 8.