A Stock You Are Evaluating Is Expected to Experience Supernormal

question 48

Multiple Choice

A stock you are evaluating is expected to experience supernormal growth in dividends of 12 percent over the next three years. Following this period,dividends are expected to grow at a constant rate of 4 percent. The stock paid a dividend of $1.50 last year and the required rate of return on the stock is 11 percent. Calculate the stock's fair present value.

• A)$16.24
• B)$21.56
• C)$24.25
• D)$27.46
• E)None of these choices are correct.

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Definitions:

Personality

Encompasses the characteristic patterns of thoughts, feelings, and behaviors that make a person unique.

Emotional Stability

A personality trait that denotes the ability to remain calm and composed under stress, and to recover quickly from upsetting events.

Individual Differences

The variations among people in their qualities, abilities, and characteristics.

Big Five

A psychological model outlining five broad dimensions of human personality traits: openness, conscientiousness, extraversion, agreeableness, and neuroticism.