The Growth in Dividends of XYZ,Inc

question 4

Multiple Choice

The growth in dividends of XYZ,Inc.is expected to be 10%/year for the next two years,followed by a growth rate of 5%/year for three years; after this five year period,the growth in dividends is expected to be 2%/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 above

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Definitions:

Copper

A reddish-brown, malleable, ductile metallic element with high electrical and thermal conductivity, used in many alloys and as electrical conductors.

Zinc

A metallic chemical element with the symbol Zn and atomic number 30, used in alloys and as a protective coating for iron and steel.

Factor Prices

The prices of inputs such as labor, capital, land, and raw materials used in the production of goods or services.

Production Function

An equation that describes the maximum output of a product that can be obtained from a given set of inputs.