Ackert Company's Last Dividend Was $1

question 62

Multiple Choice

Ackert Company's last dividend was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 12.0%. What is the best estimate of the current stock price?

• A) $37.05
• B) $38.16
• C) $39.30
• D) $40.48
• E) $41.70

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Definitions:

Preincorporation Contract

An agreement entered into on behalf of a corporation before it is legally formed.

Corporate Promoter

An individual or entity that undertakes the efforts to organize and establish a corporation, including arranging initial capital, legal requirements, and business plans.

Liable

Subject to legal responsibility or obligation, typically involving financial restitution.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another party, such as a trustee's duty towards a beneficiary.