Changes in Growth and Stock Valuation Consider a Firm That

question 96

Multiple Choice

Changes in Growth and Stock Valuation Consider a firm that had been priced using a 10 percent growth rate and a 14 percent required rate. The firm recently paid a $1.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12 percent rate. How much should the stock price change (in dollars and percentage) ?

• A) $25, 1%
• B) $25, 100%
• C) $28.50, 1.04%
• D) $28.50, 104%

---

Definitions:

Tax Revenue

The monetary gains that are acquired by governments from taxation.

Arthur Laffer

Arthur Laffer is an economist known for the Laffer Curve, which posits that there is an optimal tax rate that maximizes revenue without discouraging economic activity.

Tax Revenues

The proceeds that governments secure by enacting taxes.

Tax

A financial charge or levy imposed by a government on individuals or entities, primarily used to fund public expenditures.