Pinecrest Inc

question 57

Essay

Pinecrest Inc.has a 13% required rate of return.It does not expect to initiate dividends for 10 years,at which time it will pay $5 per share in dividends.At that time Pinecrest expects its dividends to grow at 5% forever.What is an estimate of Pinecrest's price in 10 years (P₁₀)if its dividend at the end of year 10 is $5.00? What is its price in today's dollars if you desire a rate of return of 13%? Repeat the problem,but replace the 10 years with 30 years and compare the two sets of prices.Describe the relationship between the number of years before you receive dividends and today's price.

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Definitions:

Creativity

The capability to produce or identify concepts, options, or opportunities that can aid in resolving issues, engaging in communication with people, and providing amusement to both ourselves and others.

Low Tolerance

A reduced capacity or willingness to accept deviations from a standard or to endure difficult conditions or treatment.

Internal Locus

This concept describes individuals who believe they have control over their life events and outcomes, as opposed to being controlled by external factors.