Exhibit 20-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 54

Multiple Choice

Exhibit 20-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Davenport Corporation's last dividend was $2.70 and the directors expect to maintain the historic 3% annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 5% for the next three years and the stock will then reach $25 per share.
-Refer to Exhibit 20-4. How much should you be willing to pay for the stock if you feel that the 5% growth rate can be maintained indefinitely and you require a 17% return?

• A) $22.16
• B) $19.28
• C) $21.32
• D) $23.63
• E) $25.46

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Definitions:

Counteroffer

A new offer, the proposal of which rejects and terminates the offer available until then.

Unconditional Acceptance

An agreement to the terms of an offer without imposing any additional conditions or limitations.

Postbox Rule

A principle in contract law stating that an offer is considered accepted at the moment the acceptance is sent, not when it is received by the offeror.

Simon Fraser University

A public research university located in British Columbia, Canada, known for its comprehensive academic and research programs.