Acme Corporation Stock Currently Sells for $22

question 45

Multiple Choice

Acme Corporation stock currently sells for $22.08 per share.The last dividend paid was $1.00 per share.The next dividend will be paid in one year and is expected to be $1.50;the following year's dividend will be $2.50;and,in the third year dividends are expected to begin growing at a constant rate.If the appropriate discount rate for Acme is 20 percent,at what constant rate does the market expect dividends to grow in Year 3 and beyond?

• A) 10.0%
• B) 15.0%
• C) 8.0%
• D) 20.0%
• E) 12.5%

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Definitions:

Density

The mass per unit volume of a substance, often measured in grams per cubic centimeter (g/cm^3) or kilograms per cubic meter (kg/m^3).

Volume

The amount of three-dimensional space occupied by an object or enclosed within a container, usually measured in cubic units.

Material

A substance or mixture of substances that constitutes an object, used in the production and manufacturing of goods or constructions.

Density

A measure of mass per unit volume of a substance, often expressed in grams per cubic centimeter or kilograms per cubic meter.