Smart Draw Company Is Expected to Have Per Share FCFE

question 71

Multiple Choice

Smart Draw Company is expected to have per share FCFE in year 1 of $1.20, per share FCFE in year 2 of $1.50, and per share FCFE in year 3 of $2.00. After year 3, per share FCFE is expected to grow at the rate of 10% per year. An appropriate required return for the stock is 14%. The first three dividends are worth _______ today.

• A) $2.54
• B) $3.56
• C) $4.32
• D) $2.37
• E) None of the above

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Definitions:

Utility Bill

A statement of charges for the consumption of utilities such as electricity, gas, water, or sewage.

General Journal

A primary accounting record used for the chronological recording of all types of transactions.

Utilities Expense

Costs incurred by a business for essential services such as water, electricity, and gas.

General Journal

A comprehensive journal that records all the day-to-day financial transactions of a company, including debits and credits.