The Growth in Dividends of XYZ, Inc

question 92

Multiple Choice

The growth in dividends of XYZ, Inc. is expected to be 10% per year for the next two years, followed by a growth rate of 5% per year for three years. After this five-year period, the growth in dividends is expected to be 2% per 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 options are correct.

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Definitions:

Competitive Inertia

The tendency of organizations to persist with competitive strategies due to past successes, even when they are no longer effective.

Uncertainty Avoidance

A societal characteristic indicating how much ambiguity and uncertainty are accepted within a culture.

Uncertainty Avoidance

A cultural dimension that describes the extent to which a society or organization tolerates ambiguity and uncertainty.

Dissenting Viewpoints

Opinions or perspectives that differ significantly from the mainstream or accepted stance within a group, organization, or society.