What Is the Current Value of a Share of HiGro

question 61

Multiple Choice

What is the current value of a share of HiGro common stock that does not pay a current dividend? Earnings are growing at a 20 percent per year rate for the next 10 years.Assume the investor has a required rate of return of 15 percent and expects to sell the security in 5 years.Current earnings are $1.50 per share.

• A)$56.87
• B)$62.21
• C)$25.00
• D)There is insufficient information to solve this problem.

---

Definitions:

Market-Based Policies

Economic strategies that utilize market principles and forces to address and solve problems, often with the goal of improving efficiency and outcomes.

Environmental Protection Agency

A U.S. federal agency established to coordinate and enforce national pollution control laws and regulations to protect human health and the environment.

Pollution Permits

Allowances given to companies that permit them to emit a certain amount of pollutants; can be bought, sold, or traded.

External Benefit

Positive effects of a transaction or activity on third parties not directly involved in the transaction, which are not reflected in the market price.