Distant Thunder, Inc paid a dividend of $5.00 per share on its common stock yesterday. Dividends
are expected to grow at a constant rate of 10% for the next two years, at which point the dividends
will begin to grow at a constant rate indefinitely.
If the stock is selling for $50 today and the
required return is 15%, what it the expected annual dividend growth rate after year two?
A) 5.000% B) 3.878% C) 4.556% D) 3.365%
D
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What will be an ideal response?
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