Rogers Robotics Currently (2009) Does Not Pay a Dividend

question 59

Multiple Choice

Rogers Robotics currently (2009) does not pay a dividend. However, the company is expected to pay a $1.00 dividend two years from today (2011) . The dividend is then expected to grow at a rate of 20 percent a year for the following three years. After the dividend is paid in 2014, it is expected to grow forever at a constant rate of 7 percent. Currently, the risk-free rate is 6 percent, market risk premium (rM - rRF) is 5 percent, and the stock's beta is 1.4. What should be the price of the stock today?

• A) $22.91
• B) $21.20
• C) $30.82
• D) $28.80
• E) $20.16

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Definitions:

Anticodon

Three-base sequence in a transfer RNA molecule base that pairs with a complementary codon in mRNA.

Transfer RNA

An adaptor molecule in protein synthesis that carries a specific amino acid to the ribosome, where its anticodon pairs with the corresponding codon on mRNA.

Ribosomal RNA

A type of RNA which, along with proteins, forms the structure of ribosomes and plays a role in the translation of mRNA into proteins.

DNA Molecule

The carrier of genetic information in living organisms and viruses, composed of two long strands forming a double helix.