Last Month,Springfield Power Co

question 16

Multiple Choice

Last month,Springfield Power Co.announced that shareholders of record on this coming Friday will receive a dividend of $2.75 per share.(Assume that the dividend will also be paid on Friday.) After this Friday,the next dividend is expected in one year's time.Dividends are expected to be paid annually in perpetuity and are expected to grow at a rate of 5%.Shareholders of Springfield Power Co.require a 12.5% return on equity.What is the stock price of Springfield Power on Tuesday? (Preceding the Friday Day of Record.)

• A) $32.00
• B) $37.66
• C) $41.25
• D) $43.91
• E) $46.25

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Definitions:

Holt's Model

A forecasting technique that extends exponential smoothing to allow forecasting of data with trends by adding a trend smoothing coefficient.

Trend Component

A pattern or direction in data series that shows movement in a particular direction over time, often identified in time-series analysis.

Historical Demand

The record of past consumer purchasing behavior that is used to predict future demand patterns.

Qualitative Forecasting Methods

Forecasting techniques based on expert judgments and not on numerical data, often used for market trends.