Club Auto Parts' last dividend, D0, was $0.50, and the company expects to experience no growth for the next 2 years. However, Club will grow at an annual rate of 5 percent in the third and fourth years, and, beginning with the fifth year, it should attain a 10 percent growth rate which it will sustain thereafter. Club has a required rate of return of 12 percent. What should be the price per share of Club stock at the end of the second year, ?
A) $19.98
B) $25.06
C) $31.21
D) $19.48
E) $27.55

Question

Quizplus · Accepted Answer

The Answer of Club Auto Parts' last dividend, D0, was $0.50, and the company expects to experience no growth for the next 2 years. However, Club will grow at an annual rate of 5 percent in the third and fourth years, and, beginning with the fifth year, it should attain a 10 percent growth rate which it will sustain thereafter. Club has a required rate of return of 12 percent. What should be the price per share of Club stock at the end of the second year, ?
A) $19.98
B) $25.06
C) $31.21
D) $19.48
E) $27.55

Club Auto Parts' Last Dividend, D0, Was $0