Sinclair ᴾʰᵃʳᵐᵃᶜᵉᵘᵗᶦᶜᵃˡˢ,A Small Drug Company,develops a Vaccine That Will Protect

question 3

Multiple Choice

Sinclair ᴾʰᵃʳᵐᵃᶜᵉᵘᵗᶦᶜᵃˡˢ,a small drug company,develops a vaccine that will protect against Helicobacter pylori,a bacteria that is the cause of a number of diseases of the stomach.It is expected that Sinclair ᴾʰᵃʳᵐᵃᶜᵉᵘᵗᶦᶜᵃˡˢ will experience extremely high growth over the next three years and will reinvest all of its earnings in expanding the company over this time.Earnings were $1.20 per share before the development of the vaccine and are expected to grow by 40% per year for the next three years.After this time,it is expected growth will drop to 5% and stay there for the expected future.Four years from now Sinclair will pay dividends that are 75% of its earnings.If its equity cost of capital is 10%,what is the value of a share of Sinclair ᴾʰᵃʳᵐᵃᶜᵉᵘᵗᶦᶜᵃˡˢ ᵗᵒᵈᵃʸ?

• A) $33.33
• B) $38.96
• C) $48.30
• D) $52.00
• E) $54.45

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Definitions:

Night Shift

A work shift that takes place during the nighttime hours, often in industries such as healthcare, security, and manufacturing.

Caffeine Intake

The consumption of caffeine, a stimulant, through foods and beverages like coffee, tea, and chocolate.

Frequent Breaks

Short periods of rest taken regularly during activities or work to prevent fatigue, enhance performance, and support wellbeing.

Rest Days

Scheduled periods of time dedicated to recovery and relaxation, away from work or intense physical activity.