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

question 34

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 require a 17% return?

• A) $16.97
• B) $22.16
• C) $21.32
• D) $32.63
• E) $23.63

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Definitions:

Government Spending

The total of all public sector expenditures, including public goods and services provided, and investments made by government agencies.

Federal Government

The national government of a federal country, where powers are divided among a central authority and constituent political units.

Private Investment

Expenditures by private sector entities on means of production, such as infrastructure or equipment, intended to yield future returns.

Prosperity

A state of economic growth and stability, characterized by high levels of employment, income, and consumer confidence.