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4 Homer Simpson is considering buying shares in Eye Caramba, a Springfield-based optometry chain. Shares are selling for $10, and Homer, Lisa, and Bart expect
4 Homer Simpson is considering buying shares in Eye Caramba, a Springfield-based optometry chain. Shares are selling for $10, and Homer, Lisa, and Bart expect the first dividend to be $1.00, and they expect it to be paid in exactly one year. Homer and Bart expect the dividend to grow at an 8% rate forever. All agree that the correct "" (or "R") on this investment is 6%. Whose statement is most nearly correct? it of Select one: O a. None of the responses below is correct O b. Homer: Doh! What a horrible investment!!! It has a negative present value!!! O c. Bart: Don't have a cow man, it's present value is $50 so it is a great investment! O d. Lisa: Dad, a company's dividends can't grow at an 8% rate forever! But even if it's dividends grow at a more reasonable 2% annual rate, it's present value is $25 so it is a great investment
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