Exhibit 11.7 Use the Information Below for the Following Problem(S)

question 66

Multiple Choice

Exhibit 11.7
Use the Information Below for the Following Problem(S)
Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow at a rate of 9% per year for the next three 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 11.7.The dividends for years 1,2,and 3 are

• A) $1.5, $2.0, $2.05
• B) $1.64, $1.78, $1.94
• C) $1.64, $1.94, $2.24
• D) $1.5, $2.40, $3.30
• E) $2.07, $2.14, $2.21

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Definitions:

Steam Engines

Engines that generate mechanical power by utilizing steam to perform work, historically vital to the industrial revolution and the development of transport and manufacturing.

Long Tail

A business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items.

Feature Creep

The tendency for products to become overly complex due to the continuous adding of features, often compromising usability and functionality.

Inert Set

A group of brands that a consumer is aware of but is indifferent towards when making a purchase decision.