A Fast Growing Firm Recently Paid a Dividend of $1

question 25

Multiple Choice

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a rate of 15 percent rate for the next 3 years. Afterwards, a more stable 6 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

• A)$33.54
• B)$37.99
• C)$39.37
• D)$42.03

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Definitions:

Groupthink

A psychological phenomenon that occurs within a group of people when the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Group's Decision

A resolution or course of action determined by a collection of individuals or a team.

Leader-Exchange Theory

A theory that emphasizes the importance of the relationship between leader and followers, focusing on how trust, respect, and mutual obligations are developed.