Solved

ABC Company Has Been Growing at a 10% Rate,and It

Question 43

Multiple Choice

ABC Company has been growing at a 10% rate,and it just paid a dividend of D0 = $3.00.Due to a new product,ABC expects to achieve a dramatic increase in its short-run growth rate,to 20 percent annually for the next 2 years.After this time,growth is expected to return to the long-run constant rate of 10 percent.The company's beta is 2.0,the required return on an average stock is 11 percent,and the risk-free rate is 7 percent.What should the dividend yield ( ABC Company has been growing at a 10% rate,and it just paid a dividend of D<sub>0</sub> = $3.00.Due to a new product,ABC expects to achieve a dramatic increase in its short-run growth rate,to 20 percent annually for the next 2 years.After this time,growth is expected to return to the long-run constant rate of 10 percent.The company's beta is 2.0,the required return on an average stock is 11 percent,and the risk-free rate is 7 percent.What should the dividend yield (   /P<sub>0</sub>) be today? A)  3.93% B)  4.60% C)  10.00% D)  7.54% E)  2.33% /P0) be today?


A) 3.93%
B) 4.60%
C) 10.00%
D) 7.54%
E) 2.33%

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents