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Business, 24.04.2020 04:16 alfonso55

The next three problems refer to Roadrunner Enterprises. Roadrunner Enterprises is expected to grow its dividends and earnings at various rates. The company just paid a $1.00 dividend. The company expects to grow its earnings and dividends at 13% for the next two years, and then the company expects to grow at 10% for the following three years after which the company expects to grow at a constant rate of 7% per year indefinitely. The required rate of return on Roadrunner's common stock is 13% 16·What is the present value of the first five years, dividends?

A) Less than $3.00
B) $3.00 to $4.00
C) $4.00 to $4.50
D) $4.50 to $5.00
E) More than $5.00

what is the present value of the "residual"? (The "residual" is the FMV of the stock when the constant growth begins.)

A) Less than $20.00
B) $20.00 to $26.00
C) $25.00 to $35.00
D) $36.00 to $60.00
E) More than串50.00

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