Summer Co Is Expected to Pay a Dividend or $4

question 39

Multiple Choice

Summer Co. is expected to pay a dividend or $4.00 per share out of earnings of $7.50 per share. If the required rate of return on the stock is 15% and dividends are growing at a current rate of 10% per year, calculate the present value of the growth opportunity for the stock (PVGO) .

• A) $80
• B) $30
• C) $50
• D) $26

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