Exhibit 20-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The National Motor Company's last dividend was $1.25 and the directors expect to maintain the historic 4% annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7% for the next three years and the stock will then reach $25.00 per share.
-Refer to Exhibit 20-5. How much should you be willing to pay for the stock if you require a 16% return?
A) $17.34
B) $18.90
C) $19.09
D) $19.21
E) None of the above

Question

Quizplus · Accepted Answer

The Answer of Exhibit 20-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The National Motor Company's last dividend was $1.25 and the directors expect to maintain the historic 4% annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7% for the next three years and the stock will then reach $25.00 per share.
-Refer to Exhibit 20-5. How much should you be willing to pay for the stock if you require a 16% return?
A) $17.34
B) $18.90
C) $19.09
D) $19.21
E) None of the above

Exhibit 20-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)