A Financial Analyst Has Been Following Fast Start Inc

question 92

Multiple Choice

A financial analyst has been following Fast Start Inc. ,a new high-growth company.She estimates that the current risk-free rate is 6.25 percent,the market risk premium is 5 percent,and that Fast Start's beta is 1.75.The current earnings per share (EPS₀) is $2.50.The company has a 40 percent payout ratio.The analyst estimates that the company's dividend will grow at a rate of 25 percent this year,20 percent next year,and 15 percent the following year.After three years the dividend is expected to grow at a constant rate of 7 percent a year.The company is expected to maintain its current payout ratio.The analyst believes that the stock is fairly priced.What is the current price of the stock?

• A) $16.51
• B) $17.33
• C) $18.53
• D) $19.25
• E) $19.89

---

Definitions:

Recurrent Themes

Motifs or ideas that are repeatedly observed across a work of literature, art, or music, reflecting overarching concepts or messages.

Selectivity

The process or practice of choosing or selecting from among a variety of options or possibilities.

Past 50 Years

A reference to the historical period extending approximately from the current year backwards through the last five decades.

Prejudice And Discrimination

Negative, unjust treatment of individuals based on differences like race, gender, or other characteristics, often rooted in preconceived judgments.