Exhibit 11.6 Use the Information Below for the Following Problem(S)

question 69

Multiple Choice

Exhibit 11.6
Use the Information Below for the Following Problem(S)
Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
-Refer to Exhibit 11.6.The present value today of dividends for years 1 to 5 is

• A) $4.06
• B) $10.28
• C) $12.40
• D) $14.52
• E) $10.0

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Definitions:

Pupils

The round, black openings in the center of the irises of the eyes that regulate the amount of light that enters.

Dilates

Refers to the widening or expanding of something, often used in the context of blood vessels or pupils adjusting to light or stress.

Lowers

Decreases in amount, intensity, or magnitude, often used in the context of reducing something to a lesser state or level.

Autonomic Nervous System

A part of the peripheral nervous system that controls involuntary body functions such as heart rate and digestion.