Modem Development,Inc

question 123

Multiple Choice

Modem Development,Inc.paid a dividend of $5.00 per share on its common stock yesterday.Dividends are expected to grow at a constant rate of 10% for the next two years,at which point the dividends will begin to grow at a constant rate indefinitely.If the stock is selling for $50 today and the required return is 15%,what it the expected annual dividend growth rate after year two?

• A) 3.365%
• B) 3.878%
• C) 4.556%
• D) 5.000%

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