A Fast Growing Firm Recently Paid a Dividend of $1

question 29

Multiple Choice

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a rate of 15% rate for the next 3 years. Afterwards, a more stable 6% growth rate can be assumed. If a 10% discount rate is appropriate for this stock, what is its value?

• A) $33.54
• B) $37.99
• C) $39.37
• D) $42.03

---

Definitions:

Affect-as-information Hypothesis

A theory suggesting that individuals use their emotional states as information in making judgments and decisions.

Emotionally Affected

Experiencing an impact on one's mood or feelings due to an external event, situation, or interaction.

Predict

The act of stating or estimating that a specified event will happen in the future based on existing data or patterns.

Affective Forecasting

The process of predicting one's emotional state in future circumstances.