Hypo Tech Expects Its Net Income to Grow at 20

question 18

Multiple Choice

Hypo Tech expects its net income to grow at 20 percent a year for the next two years and then taper off to a constant 5 percent annual rate of growth. The firm maintains a constant dividend payout ratio. Which one of the following models is best suited for computing the current value of this firm's stock?

• A)irregular dividend
• B)constant perpetual growth
• C)constant dividend
• D)two-stage dividend growth
• E)perpetuity formula

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