Consider a Firm That Had Been Priced Using a 6

question 31

Multiple Choice

Consider a firm that had been priced using a 6 percent growth rate and a 9 percent required rate. The firm recently paid a $0.50 dividend. The firm has just announced that because of a new joint venture, it will likely grow at an 8 percent rate. How much should the stock price change (in dollars and percentage) ?

• A) $33.33, 67 percent
• B) $33.33, 198 percent
• C) $36.33, 67 percent
• D) $36.33, 206 percent

---

Definitions:

Interest

Interest is the cost of borrowing money, typically expressed as an annual percentage rate, or the earnings from lending money.

Investments

Assets or items acquired with the goal of generating income or appreciation, including stocks, bonds, real estate, or business ventures.

Savings

Money set aside for future use, often stored in accounts that accrue interest over time, helping to protect against financial emergencies or to finance future purchases.

Interest

The cost of borrowing money or the reward for saving, expressed as a percentage of the principal amount per period of time.