A Fast Growing Firm Recently Paid a Dividend of $1

question 16

Multiple Choice

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a 25 percent rate for the next three years. Afterwards, a more stable 8 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

• A) $12.50
• B) $75.93
• C) $83.13
• D) $120.24

---

Definitions:

Observational Learning

Observational learning is a learning process through which individuals alter their behavior after observing others, modeling their actions based on what they have observed.

Habituation

The process by which there is a decrease in response to a stimulus after being repeatedly exposed to it, highlighting an organism's ability to adapt to its environment.

Emotional Arousal

The state of being emotionally stimulated or excited, which can affect both physiological and psychological functioning.

Observable Behavior

Any action or reaction of a person or animal that can be directly seen or measured.