ABC Common Stock Is Expected to Have Extraordinary Growth in Earnings

question 97

Multiple Choice

ABC common stock is expected to have extraordinary growth in earnings and dividends of 20% per year for 2 years,after which the growth rate will settle into a constant 6%.If the discount rate is 15% and the most recent dividend was $2.50,what should be the approximate current share price?

• A) $31.16
• B) $33.23
• C) $37.39
• D) $47.77

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Definitions:

Anterior Fontanel

The larger, diamond-shaped soft spot on a baby's skull that allows for brain growth and skull expansion.

Infant

A very young child or baby, typically from birth to one year of age, who is in the earliest stages of development.

Mongolian Spot

A benign, blue-gray birthmark, often appearing on the skin of the lower back and buttocks of infants, more common in those of Asian or African descent.

African American

An ethnic group of Americans with total or partial ancestry from any of the black racial groups of Africa.