Consider a Firm That Had Been Priced Using a 10

question 123

Multiple Choice

Consider a firm that had been priced using a 10 percent growth rate and a 14 percent required rate. The firm recently paid a $1.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12 percent rate. How much should the stock price change (in dollars and percentage) ?

• A) $25, 1 percent
• B) $25, 100 percent
• C) $28.50, 1.04 percent
• D) $28.50, 104 percent

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