Ace Frisbee Corporation Produces a Good That Is Very Mature

question 36

Multiple Choice

Ace Frisbee Corporation produces a good that is very mature in their product life cycles. Ace Frisbee Corporation is expected to pay a dividend in Year 1 of $3.00, a dividend in Year 2 of $2.00, and a dividend in Year 3 of $1.00. After Year 3, dividends are expected to decline at the rate of 2% per year. An appropriate required return for the shares is 8%. Using the multistage DDM, the shares should be worth ________ today.

• A)$13.07
• B)$13.58
• C)$18.25
• D)$18.78

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