The Growth in Dividends of XYZ, Inc

question 46

Multiple Choice

The growth in dividends of XYZ, Inc.is expected to be 10% per year for the next two years, followed by a growth rate of 5% per year for three years; after this five-year period, the growth in dividends is expected to be 2% per year, indefinitely.The required rate of return on XYZ, Inc.is 12%.Last year's dividends per share were $2.00.What should the stock sell for today

• A)$8.99
• B)$25.21
• C)$40.00
• D)$110.00
• E)None of the options

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Definitions:

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