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Question
Worldwide Inc., a large conglomerate, has decided to acquire another firm. Analysts are forecasting a period (2 years) of extraordinary growth (20 percent), followed by another 2 years of unusual growth (10 percent), and finally a normal (sustainable) growth rate of 6 percent annually. If the last dividend was D0 = $1.00 per share and the required return is 8 percent, what should the market price be today?
a. $93.70
b. $76
c. $99.66
d. $98.57
e. $68.87
Answer
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