A Share of Stock Has a Dividend of D₀ =

question 6

Multiple Choice

A share of stock has a dividend of D₀ = $5.The dividend is expected to grow at a 20 percent annual rate for the next 10 years,then at a 15 percent rate for 10 more years,and then at a long-run normal growth rate of 10 percent forever.If investors require a 10 percent return on this stock,what is its current price?

• A) $100.00
• B) $82.35
• C) $195.50
• D) $212.62
• E) The data given in the problem are internally inconsistent,i.e. ,the situation described is impossible in that no equilibrium price can be produced.

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Definitions:

Certain Forklift

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Offer Termination

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Revocation Effective

The point in time when the cancellation or withdrawal of a legal privilege, right, or contract becomes officially valid.