Beranek Technologies Was Founded 10 Years Ago A)$1988
B)$20

question 69

Multiple Choice

Beranek Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.50 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.The forecast of the future dividend stream,along with the forecasted growth rates,is shown below.With a required return of 11.00%,what is the current intrinsic value? $\begin{array}{lcccccccc}\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 \\\hline \text { Growth rate } & \text { NA } & \text { NA } & \text { NA } & \text { NA } & 50.00 \% & 25.00 \% & 8.00 \% & 8.00 \% \\\text { Dividend } & \$ 0.00 & \$ 0.00 & \$ 0.00 & \$ 0.50 & \$ 0.75 & \$ 0.94 & \$ 1.01 & \$ 1.09\end{array}$

• A)$19.88
• B)$20.39
• C)$20.91
• D)$21.44

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