A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a rate of 15 percent for the next 3 years. Afterwards, a more stable 6 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?
A) $33.54
B) $37.99
C) $39.37
D) $42.03

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of the dividends is $33.54.

A Fast Growing Firm Recently Paid a Dividend of $1