Harvey County Choppers,Inc

question 113

Multiple Choice

Harvey County Choppers,Inc.is experiencing rapid growth.The company expects dividends to grow at 25 percent per year for the next 7 years before leveling off to 7 percent into perpetuity.The required return on the stock is 12 percent.What is the current stock price if the annual dividend share that was just paid was $1.05?

• A)$60.15
• B)$64.36
• C)$67.37
• D)$72.11
• E)$75.19

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Definitions:

Future Value

The value of an asset or an amount of money at a specific point in the future, taking into account interest or capital gains.

Interest Rate

The percentage of an amount of money charged for its use over a specific period of time.

Present Value

The immediate fiscal worth of a future amount of money or cash flow streams, discounted with a specific rate of return.

Future Value

The value of an investment or cash flow at a specified future date, based on an assumed rate of growth or return.