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Agarwal Technologies Was Founded 10 Years Ago

question 32

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Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value? Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value?   ​ A)  $8.60 B)  $9.29 C)  $10.50 D)  $9.21 E)  $10.75

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Definitions:

Economic Pie

A metaphorical representation of the total wealth or economic output available in a society or economy.

Cumulative Share

The total percentage of a market or segment controlled by a company or entity, accumulated over time.

Families Earned

Income generated by household members through wages, salaries, investments, or other sources.

Cumulative Share

The total portion or percentage owned or contributed by an individual or entity over time.

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