Sorenson Corp.'s expected year-end dividend is D1 = $1.60, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is ?

Question

Quizplus · Accepted Answer

The correct answer is A because the expected stock price in 7 years is $37.52. This can be calculated using the formula: P7 = D1 / (rs - g) * (1 + g)^7, where D1 is the expected year-end dividend, rs is the required return, g is the growth rate, and P7 is the expected stock price in 7 years.