Exhibit 11.5 Use the Information Below for the Following Problem(S)

question 78

Multiple Choice

Exhibit 11.5
Use the Information Below for the Following Problem(S)
The National Motor Company's last dividend was $1.25 and the directors expect to maintain the historic 4 percent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7 percent for the next three years and the stock will then reach $25.00 per share.
-Refer to Exhibit 11.5.How much should you be willing to pay for the stock if you require a 16 percent return?

• A) $17.34
• B) $18.90
• C) $19.09
• D) $19.21
• E) None of the above

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