Davis Brothers Incorporated Is an Apparel Manufacturer That Paid a $1.50

question 75

Multiple Choice

Davis Brothers Incorporated is an apparel manufacturer that paid a $1.50 dividend yesterday.Analysts expect dividends to grow at a constant 20 percent per year for the next four years.From that point forward,dividends are expected to grow at a constant rate of 12 percent forever.The discount rate for a firm of this risk is 15 percent.What should be the current stock price?

• A) $65.96
• B) $58.23
• C) $103.68
• D) $73.07
• E) $106.79

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