Question
You have collected the following information about Arguello Corporation. Current earnings are 2.00 per share. Earnings will grow 20% annually in stage 1. Stage 1
You have collected the following information about Arguello Corporation. Current earnings are 2.00 per share. Earnings will grow 20% annually in stage 1. Stage 1 lasts two years. Then, in stage 2, earnings will grow at 6% forever. Dividends will be 30% of earnings in stage 1. In stage 2, because the company is growing more slowly, dividends will be 60% of earnings. The required rate of return is 12%. What is the value per share of Arguello?
| A. | $24.05 | |
| B. | $25.67 | |
| C. | $28.33 | |
| D. | $29.17 |
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International Finance Theory And Policy
Authors: Paul Krugman, Maurice Obstfeld, Marc Melitz
12th Global Edition
1292417005, 978-1292417004
