Super Sounds Is Expecting a Period of Intense Growth and Has

question 69

Multiple Choice

Super Sounds is expecting a period of intense growth and has decided to retain more of their earnings to help finance that growth. As a result, they are going to reduce the annual dividend by
20% a year for the next three years. After that they will maintain a constant dividend of $1 a share.
Last year, the company paid $2.25 as the annual dividend per share. What is the market value of
This stock if the required rate of return is 16%?

• A) $6.63
• B) $7.36
• C) $8.08
• D) $9.61
• E) $11.23

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