At Date 0, the Market's Expectation for the Year 1

question 11

Multiple Choice

At date 0, the market's expectation for the year 1 dividend on firm XYZ's stock is D₁=$1.45.The market also expects dividends to grow at an annual rate of g_S=2% in the following 3 years after which dividends will grow at an annual rate of g_N=6% into perpetuity.If the firm's cost of equity capital is r_E=1%, the value of XYZ stock is:

• A)$31.52
• B)$25.52
• C)$19.52
• D)$13.52

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Definitions:

Psychological Disorder

A disorder characterized by patterns of thought, behavior, or emotions that are significantly distressing or disabling in social, work, or other areas of functioning.

Suicide Attempts

Acts of trying to take one's own life intentionally.

Mood Disorder

A disorder affecting one’s emotional state, including major depressive disorder and bipolar disorders.

Modeling

A process of learning in which a person acquires responses by observing and imitating others. Also, a therapy approach based on the same principle.