Exhibit 11.6 Use the Information Below for the Following Problem(S)

question 69

Multiple Choice

Exhibit 11.6
Use the Information Below for the Following Problem(S)
Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
-Refer to Exhibit 11.6.The present value today of dividends for years 1 to 5 is

• A) $4.06
• B) $10.28
• C) $12.40
• D) $14.52
• E) $10.0

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Definitions:

Commercial Parking Garage

A facility designed to provide parking space for vehicles on a fee-paying basis, often found in urban areas.

Cultivate Hops

The agricultural practice of growing hops, which are plants used primarily as a flavoring and stability agent in beer.

Market Prices

The prevailing price at which goods, services, or securities are bought and sold in a market.

Brewery

An establishment focused on the production of beer through the fermentation process, which may also serve as a venue for selling and tasting.