Agarwal Technologies Was Founded 10 Years Ago

question 63

Multiple Choice

Agarwal 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 $0.25 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.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value? ​

• A)$ 9.94
• B)$10.19
• C)$10.45
• D)$10.72
• E)$10.99

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Definitions:

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