Talon Corp

question 232

Multiple Choice

Talon Corp. just paid a dividend of $1.50 per share. The dividends are expected to grow at 20% for the next eight years and then level off to a 5% growth rate indefinitely. If the required return is 12%,
What is the price of the stock today?

• A) $22.00
• B) $55.65
• C) $23.00
• D) $23.50
• E) $24.00

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Definitions:

Moral Hazard

A situation where one party is more likely to take risks because another party bears the consequences of those risks.

Specific Purpose

A clearly defined and precise goal or objective that a project, action, or entity aims to achieve.

Market Signaling

Actions taken by buyers and sellers to communicate quality in a world of uncertainty.

Education

The systematic process of facilitating learning, or the acquisition of knowledge, skills, values, and habits.