You Are Considering the Purchase of a Common Stock That

question 81

Multiple Choice

You are considering the purchase of a common stock that paid a dividend of $2.00 yesterday.You expect this stock to have a growth rate of 15 percent for the next 3 years,resulting in dividends of D₁=$2.30,D₂=$2.645,and D₃=$3.04.The long-run normal growth rate after year 3 is expected to be 10 percent (that is,a constant growth rate after year 3 of 10% per year forever) .If you require a 14 percent rate of return,how much should you be willing to pay for this stock?

• A)$89.75
• B)$83.65
• C)$56.46
• D)$62.57

---

Definitions:

Job Experience

Job experience refers to the practical knowledge and skills a person gains while working in a specific field or position, contributing to their competence and employability.

Geographical Place

A specific physical location on Earth, defined by coordinates such as latitude and longitude or by identifiable boundaries.

Community Factor

Elements or conditions within a community that influence its functionality and health outcomes.

Public Transport

A system of vehicles such as buses and trains provided by the government or private companies to move people within urban areas and between cities.