New Gadgets Is Growing at a Very Fast Pace

question 20

Multiple Choice

New Gadgets is growing at a very fast pace.As a result,the company expects to pay annual dividends of $0.55,0.80,and $1.10 per share over the next three years,respectively.After that,the dividend is projected to increase by 5 per cent annually.The last annual dividend the firm paid was $0.40 a share.What is the current value of this stock if the required return is 16 per cent?

• A)$9.67
• B)$8.50
• C)$12.23
• D)$10.46
• E)$12.49

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