You Are Considering the Purchase of a Common Stock That

question 120

Multiple Choice

You are considering the purchase of a common stock that just paid a dividend of $2.00.You expect this stock to have a growth rate of 30 percent for the next 3 years,then to have a long-run normal growth rate of 10 percent thereafter.If you require a 15 percent rate of return,how much should you be willing to pay for this stock?

• A) $71.26
• B) $97.50
• C) $82.46
• D) $79.15
• E) $62.68

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