Agarwal Technologies Was Founded 10 Years Ago A)$ 994
B)$10

question 7

Multiple Choice

Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below.Assuming a required return of 11.00%, what is your estimate of the stock's current value?

$\begin{array}{llllllll}\text {year }&0&1&2&3&4&5&6\\\text { Growthrate } & \text { NA } & \text { NA } & \text { NA } & \text { NA } & 50.00 \% & 25.00 \% & 8.00 \% \\\text { Dividends } & \$ 0.000 & \$ 0.000 & \$ 0.000 & \$ 0.250 & \$ 0.375 & \$ 0.469 & \$ 0.506\end{array}$

• A)$ 9.94
• B)$10.19
• C)$10.45
• D)$10.72
• E)$10.99

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Definitions:

Direct Labor

The work of factory employees that can be directly traced to the individual units of product.

Factory Overhead Applied

The allocation of estimated manufacturing overhead costs to individual units of production based on a predetermined rate.

Underapplied

A situation where the actual costs are higher than the costs applied or allocated, typically in manufacturing overhead.

Job Order Cost Accounting

A system used to assign production costs to an individual product or batches of products, typically when each product's design is sufficiently unique.