Twenty years ago, Elle Inc. began manufacturing and selling coin-operated arcade

Question

Twenty years ago, Elle Inc. began manufacturing and selling coin-operated arcade games. Dividends are currently $5.50 per share, having grown at a 8 percent compound annual rate over the past 12 years. That growth rate is expected to be maintained for the next 2 years, after which dividends are expected to grow at half that rate for 2 years. Beyond that time, Elle's dividends are expected to grow at 2 percent per year. What is the current value of a share of Elle common stock if your required rate of return is 12%?     size="2">

  $64.55
     $38.28
                                         $70.77
                                         $45.67size="2">for="multiplechoice21_0_4">size="2">for="multiplechoice21_0_3">size="2">for="multiplechoice21_0_2">size="2">for="multiplechoice21_0_1">

size="2">for="multiplechoice21_0_4">

During the past 20 years, Jacobee's common stock dividends have grown from $0.18 to $1.86. If the past growth of dividends is expected to continue at the same rate in the future, what is the current value of Jacobee's common stock to an investor who requires an 18% rate of return?              size="2">for="multiplechoice21_0_4">

       $43.11
                                         $37.23
                                         $25.72
                                         $15.35size="2">for="multiplechoice22_0_4">size="2">for="multiplechoice22_0_3">size="2">for="multiplechoice22_0_2">size="2">for="multiplechoice22_0_1">for="multiplechoice21_0_4">

Explanation / Answer

$37.23

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