Eastern Auto Parts' Last Dividend Was Do = $0

question 12

Multiple Choice

Eastern Auto Parts' last dividend was Do = $0.50,and the company expects to experience no growth in the next 2 years.However eastern will grow at an annual rate of 5% in the third and fourth years,and,beginning with the fifth year,it should attain a 10% growth rate which it should sustain thereafter.Eastern has a cost of capital of 12%.What should be the present price per share of Eastern common stock?

• A) $19.26
• B) $31.87
• C) $30.30
• D) $20.84
• E) $19.95

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Definitions:

Strategic Planning

The process of defining a company's strategy or direction and making decisions on allocating resources to pursue this strategy, including its capital and people.

Competitive Advantage

A condition that enables a company to operate in a more efficient or otherwise higher-quality manner than the companies it competes with.

Resources

The total means available for economic and operational development, such as natural resources, personnel, and capital.

Strategic Decisions

Choices made by top management that have a significant impact on the direction and success of an organization.