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Posted: April 20th, 2022
Medical Corporation of America (MCA) has a current stock price of $35, and its last dividend (D0) was $2.50. In view of MCA’s strong financial position, its required rate of return is 12%. If MCA’s dividends are expected to grow at a constant rate in the future, what is the firm’s expected stock price in five years?
1. Medical Corporation of America (MCA) has a current stock price of $35, and its last dividend (D0) was $2.50. In view of MCA’s strong financial position, its required rate of return is 12%. If MCA’s dividends are expected to grow at a constant rate in the future, what is the firm’s expected stock price in five years?
Choice: $43.68 Choice: $48.95 Choice: $52.10 Choice: $68.75
2. A broker offers to sell you shares of Bay Area Healthcare, which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 6% per year. The stock’s required rate of return is 12%. What is the expected dollar dividend at the end of three years?
Choice: $2.38 Choice: $3.12 Choice: $5.00 Choice: 12%
3. A broker offers to sell you shares of Bay Area Healthcare, which just paid a dividend of $2.50 per share. The dividend is expected to grow at a constant rate of 5% per year. The stock’s required rate of return is 12%. What would be a price for this stock?
Choice: $32.25 Choice: $37.50 Choice: $43.10 Choice: $45.65
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The current stock price of Medical Corporation of America (MCA) is $35, and the most recent dividend (D0) was $2.50. Given MCA’s strong financial position, the required rate of return is 12%. What is MCA’s expected stock price in five years if dividends are expected to grow at a constant rate in the future?
1. The current stock price of Medical Corporation of America (MCA) is $35, and the most recent dividend (D0) was $2.50. Given MCA’s strong financial position, the required rate of return is 12%. What is MCA’s expected stock price in five years if dividends are expected to grow at a constant rate in the future?
Option: $43.68 Option: $48.95 Option: $52.10 Option: $68.75
2. A formalized paraphrase
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