The Growth in Dividends of ABC, Inc

question 36

Multiple Choice

The growth in dividends of ABC, Inc.is expected to be 15% per year for the next three years, followed by a growth rate of 8% per year for two years; after this five-year period, the growth in dividends is expected to be 3% per year, indefinitely.The required rate of return on ABC, Inc.is 13%.Last year's dividends per share were $1.85.What should the stock sell for today

• A)$8.99
• B)$25.21
• C)$40.00
• D)$27.74
• E)None of the options

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Definitions:

Foreign Company

A company that is incorporated in a country outside of the one in which it conducts a significant portion of its business activities.

Joint Venture

An agreement where multiple parties decide to combine their assets to achieve a particular goal.

Global Market Entry

Strategies and methodologies employed by businesses to enter and establish a presence in international markets.

Ownership

The legal right or state of having complete control and possession over property, assets, or an entity.