Exhibit 20-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 30

Multiple Choice

Exhibit 20-8
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Fast Grow Corporation is expecting dividends to grow at a 20% rate for the next two years. The corporation just paid a $2 dividend and the next dividend will be paid one year from now. After two years of rapid growth dividends are expected to grow at a constant rate of 9% forever.
-Refer to Exhibit 20-8. Assume that the annual dividend grows at a constant rate of 9% indefinitely instead of the supernormal growth. How much is the stock worth if dividends grow annually at 9%?

• A) $40.00
• B) $43.60
• C) $45.60
• D) $47.80
• E) $52.40

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Definitions:

Stock Indices

Aggregated measures that track the performance of a basket of stocks, representing a specific market or sector, to gauge market trends.

Canadian Stock Market

The financial market in Canada where securities are bought and sold, including the Toronto Stock Exchange and the TSX Venture Exchange.

Underpricing

The practice of setting the initial offering price of a security, typically shares, below its market value, which often leads to a first-day surge in its stock price.

IPO

Initial Public Offering, the process by which a private company becomes publicly traded by offering its shares for the first time to the public.