CBC Stock Is Expected to Sell for $22 Two Years

question 233

Multiple Choice

CBC stock is expected to sell for $22 two years from now. Supernormal growth of 5% is expected for the next two years. The current dividend is $1 and the required return is 15%. What constant
Growth rate is expected beginning in year 3?

• A) 6.5%
• B) 6.7%
• C) 8.1%
• D) 8.4%
• E) 9.5%

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Definitions:

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A small parasite that causes severe itching by burrowing into the skin, leading to conditions such as scabies.

Contagious

Can be spread from one individual to another through either direct or indirect means of contact.

Pigment

Substances that give color to materials and biological tissues, used in painting, manufacturing, and various biological functions.