Exhibit 20-7
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow at a rate of 9% per year for the next three years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
-Refer to Exhibit 20-7. What is the price of the stock today (P?)?
A) $84.81
B) $87.81
C) $91.09
D) $94.32
E) $97.61

Question

Quizplus · Accepted Answer

The Answer of Exhibit 20-7
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow at a rate of 9% per year for the next three years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
-Refer to Exhibit 20-7. What is the price of the stock today (P?)?
A) $84.81
B) $87.81
C) $91.09
D) $94.32
E) $97.61

Exhibit 20-7 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)