Davenport Corporation's last dividend was £2.70 and the directors expect to maintain the historic 3 per cent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 5 per cent for the next three years and the stock will then reach £25 per share. How much should you be willing to pay for the stock if you require a 17 per cent return?
A) £16.97
B) £22.16
C) £21.32
D) £32.63
E) £23.63

Question

Quizplus · Accepted Answer

The Answer of Davenport Corporation's last dividend was £2.70 and the directors expect to maintain the historic 3 per cent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 5 per cent for the next three years and the stock will then reach £25 per share. How much should you be willing to pay for the stock if you require a 17 per cent return?
A) £16.97
B) £22.16
C) £21.32
D) £32.63
E) £23.63

Davenport Corporation's Last Dividend Was £2