You Are Evaluating the Purchase of Cellars,Inc

question 2

Multiple Choice

You are evaluating the purchase of Cellars,Inc.common stock that just paid a dividend of $1.80.You expect the dividend to grow at a rate of 12% for the next three years.You plan to hold the stock for three years and then sell it.You estimate that a required rate of return of 17.5% will be adequate compensation for this investment.Calculate the present value of the expected dividends.Round to the nearest $0.10.

• A)$4.90
• B)$11.50
• C)$9.80
• D)$6.10

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Definitions:

Sound Wave

A type of pressure wave generated by vibrating objects, traveling through a medium like air or water and capable of being heard when they reach a sentient being's ear.

Cochlea

A spiral-shaped cavity in the inner ear that plays a crucial role in the sense of hearing by converting sound vibrations into nerve impulses.

Ossicles

Three small bones in the middle ear that help in transmitting sound vibrations from the air to the fluid-filled cochlea.

Wavelength

The distance between successive crests of a wave, especially points in a sound wave or electromagnetic wave.