Sinclair Pharmaceuticals, a Small Drug Company, Develops a Vaccine That

question 9

Multiple Choice

Sinclair Pharmaceuticals, a small drug company, develops a vaccine that will protect against Helicobacter pylori, a bacteria that is the cause of a number of diseases of the stomach. It is expected that Sinclair Pharmaceuticals will experience extremely high growth over the next three years and will reinvest all of its earnings in expanding the company over this time. Earnings were $1.10 per share before the development of the vaccine and are expected to grow by 40% per year for the next three years. After this time, it is expected that growth will drop to 5% and stay there for the expected future. Four years from now Sinclair will pay dividends that are 75% of its earnings. If its equity cost of capital is 12%, what is the value of a share of Sinclair Pharmaceuticals today?

• A) $20.62
• B) $24.17
• C) $33.96
• D) $33.51

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Definitions:

Psychoanalysis

Psychoanalysis is a therapeutic approach and theory of mental illness that attributes thoughts and behaviors to unconscious motives and conflicts.

Transference

In psychoanalysis, the tendency for a patient or client to project positive or negative feelings for important people from the past onto the therapist.

Countertransference

In psychotherapy, it refers to the emotions and projections that the therapist may feel towards the patient.

Free Association

A psychoanalytic process in which patients express their thoughts freely, letting their mind wander without censorship, to uncover unconscious thoughts and feelings.