ABC Corporation ABC Corporation Just Paid a Dividend of $1.50 a Share

question 38

Multiple Choice

ABC Corporation
ABC Corporation just paid a dividend of $1.50 a share. The dividend is expected to grow at 10% a year for the next 2 years, and the 5% per year thereafter. The required return to invest in ABC stock is 12.50%.
-What is the intrinsic value (or current price) of ABC?

• A) $21.00
• B) $22.98
• C) $23.41
• D) $24.48

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Definitions:

Subject to Taxation

Describes income, goods, property, and other financial transactions that are considered taxable by the government.

Manufacturing Plant

A manufacturing plant is a large industrial facility where goods are produced through the combination of labor, machines, and processing of raw materials.

Certificate of Authority

A document issued by a state government granting a foreign business entity permission to conduct business in that state.

Foreign Corporation

A corporation that is registered and operates in a different jurisdiction from where it was originally incorporated.