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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Definitions:

Re-evaluated

The process of assessing something again or differently to make a new judgment or decision.

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A medicinal preparation used historically to induce vomiting in cases of poisoning or overdose.

Poison Control Centre

A specialized facility offering information and advice on how to handle cases of poisoning, as well as providing treatment recommendations.

Poison

A substance that is capable of causing illness or death when introduced into or absorbed by a living organism.