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:

Operating Activities

Business activities directly related to the production, sale, and delivery of a company's products or services, generating the majority of its revenue and expenses.

Cash Dividends

Cash dividends are payments made by a corporation to its shareholders, usually as a distribution of profits.

Free Cash Flow

A measure of financial performance calculated as operating cash flow minus capital expenditures, representing the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Capital Expenditures

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.