Combined Communications Is a New Firm in a Rapidly Growing

question 39

Multiple Choice

Combined Communications is a new firm in a rapidly growing industry.The company is planning on increasing its annual dividend by 15 percent a year for the next 4 years and then decreasing the growth rate to 3.5 percent per year.The company just paid its annual dividend in the amount of $0.20 per share.What is the current value of one share of this stock if the required rate of return is 15.5 percent?

• A)$1.82
• B)$2.04
• C)$2.49
• D)$2.71
• E)$3.05

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Definitions:

Commodity Futures Contract

A standardized contract to buy or sell a particular commodity at a predetermined price at a specified time in the future.

Call Option

An agreement granting the buyer the option to purchase an asset at a predetermined price until the option expires, providing potential profit opportunities from price increases.

Financial Assets

Tangible or intangible assets held for economic benefits in the form of investments, cash, stocks, bonds, and real estate.