You observe Thundering Herd Common Stock selling for $40.00 per share. The next dividend is
expected to be $4.00, and is expected to grow at a 5% annual rate forever. If your required rate of
return is 12%, should you purchase the stock?
A) yes, because the present value of the expected future cash flows is greater than $40
B) yes, because the present value of the expected future cash flows is less than $40
C) no, because the present value of the expected future cash flows is less than $40
D) no, because the present value of the expected future cash flows is greater than $40
A
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Answer the following statement true (T) or false (F)
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What will be an ideal response?
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A) market analysis B) operations and management C) financial analysis D) ?product or service description
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