The Growth in Dividends of ABC, Inc

question 82

Multiple Choice

The growth in dividends of ABC, Inc. is expected to be 15% per year for the next three years, followed by a growth rate of 8% per year for two years. After this five-year period, the growth in dividends is expected to be 3% per year, indefinitely. The required rate of return on ABC, Inc. is 13%. Last year's dividends per share were $1.85. What should the stock sell for today?

• A) $8.99
• B) $25.21
• C) $40.00
• D) $27.74
• E) None of the options are correct.

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Definitions:

Triphosphate Group

A triphosphate group consists of a molecule containing three phosphate groups, and it's most commonly associated with adenosine triphosphate (ATP), which is a primary energy carrier in cells.

Nucleotide

Organic molecules that serve as the monomers of nucleic acids like DNA and RNA, composed of a nitrogenous base, a five-carbon sugar, and one or more phosphate groups.

mRNA

Messenger RNA, a type of RNA that carries instructions from DNA in the nucleus to the ribosome, where proteins are synthesized.

5′ Cap

A modified form of guanine nucleotide added to the 5′ end of eukaryotic mRNA, important for mRNA stability and initiation of translation.