McGaha Enterprises Expects Earnings and Dividends to Grow at a Rate

question 32

Multiple Choice

McGaha Enterprises expects earnings and dividends to grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0.The company's last dividend, D₀, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%.What is the current price of the common stock?

• A) $26.77
• B) $27.89
• C) $29.05
• D) $30.21
• E) $31.42

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Definitions:

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A term referring to the modern or new form of capitalism that includes a mix of traditional capitalist principles and innovative practices or policies.

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Organizations that operate in a manner that enhances society and the environment, beyond the interests of the company and legal requirements.

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