Exhibit 11.8 Use the Information Below for the Following Problem(S)

question 87

Multiple Choice

Exhibit 11.8
Use the Information Below for the Following Problem(S)
Fast Grow Corporation is expecting dividends to grow at a 20% rate for the next two years. The corporation just paid a $2 dividend and the next dividend will be paid one year from now. After two years of rapid growth dividends are expected to grow at a constant rate of 9% forever.
-Refer to Exhibit 11.8.If the required return is 14%,what is the value of Fast Grow Corporation common stock today?

• A) $40.26
• B) $42.38
• C) $46.70
• D) $52.63
• E) $62.78

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in manufacturing products or delivering services.

Variable Overhead

Costs of production that fluctuate with the level of output, such as utility expenses for machinery, which increase with more extensive production.

Direct Materials

Direct materials are raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the product's cost.

Direct Labor-Hours

The full sum of time spent by employees directly engaged in the process of creating products.