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1.Bubba Gumm Company has an expected ROE of 9%. The dividend growth rate will be _______ if the firm follows a policy of plowing back
1.Bubba Gumm Company has an expected ROE of 9%. The dividend growth rate will be
_______ if the firm follows a policy of plowing back 10% of earnings.
A. 90%
B. 10%
C. 9%
D. 0.9%
E. None of these is correct
2. A preferred stock will pay a dividend of $2.75 in the upcoming year, and every year thereafter,
i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the
constant growth DDM to calculate the intrinsic value of this preferred stock.
A. $0.275
B. $27.50
C. $31.82
D. $56.25
E. None of these is correct
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