Consider a Firm That Had Been Priced Using a 12

question 109

Multiple Choice

Consider a firm that had been priced using a 12 percent growth rate and a 16 percent required return. The firm recently paid a $5.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12.5 percent rate. How much should the stock price change (in dollars and percentage) ?

• A) $21.50; 13.72%
• B) $21.50; 16.14%
• C) $20.71; 14.79%
• D) $20.71; 19.93%

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Definitions:

Functional Units

Components or parts of a system that work together to perform a specific function or task.

Heredity

The genetic transmission of characteristics from parents to offspring, influencing traits such as eye color, height, and susceptibility to certain diseases.

Chromosomes

Within every cell, rod-shaped structures that carry the genes.

DNA

Deoxyribonucleic acid, a molecule that carries the genetic instructions used in the growth, development, functioning, and reproduction of all known living organisms and many viruses.