Sawchuck Consulting Has Been Profitable for the Last 5 Years

question 7

Multiple Choice

Sawchuck Consulting has been profitable for the last 5 years, but it has never paid a dividend. Management has indicated that it plans to pay a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value?

• A) $9.94
• B) $10.19
• C) $10.45
• D) $10.72
• E) $10.99

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Definitions:

Oligodendroglial Cell

A type of glial cell in the central nervous system responsible for the formation and maintenance of myelin sheaths around neurons.

Schwann Cell

A type of glial cell located in the peripheral nervous system that wraps around nerve fibers, forming the myelin sheath which speeds up electrical impulses.

Astrocyte

A type of glial cell in the brain that provides support and nutrition to neurons, maintains the blood-brain barrier, and plays a role in the repair and scarring process of the brain and spinal cord.

Efferent

Referring to nerve fibers that carry signals away from the central nervous system to effectors such as muscles and glands.