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

question 72

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 feel that the 7 percent growth rate can be maintained indefinitely and you require a 16 percent return?

• A) $11.15
• B) $14.44
• C) $14.86
• D) $18.90
• E) $19.24

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Definitions:

Cluster Categorization

The process of organizing objects into groups based on shared characteristics or properties.

DSM-IV-TR

The fourth edition, text revision, of the Diagnostic and Statistical Manual of Mental Disorders, a guide for diagnosing mental disorders.

Cluster B

Cluster B refers to one of the three clusters of personality disorders in the DSM (Diagnostic and Statistical Manual of Mental Disorders), characterized by dramatic, overly emotional, or unpredictable thinking or behavior.

DSM-IV-TR

The fourth edition, text revision of the Diagnostic and Statistical Manual of Mental Disorders, a guide for diagnosing mental disorders.