Latcher AB is a relatively new firm that is still in a period of rapid development.The company plans on retaining all of its earnings for the next six years.Seven years from now,the company projects paying an annual dividend of €.25 a share and then increasing that amount by 3% annually thereafter.To value this equity as of today,you would most likely determine the value of the share _____ years from today before determining today's value.
A)4
B)5
C)6
D)7
E)8

Question

Quizplus · Accepted Answer

The correct answer is C because the company plans on retaining all of its earnings for the next six years. So, the value of the share 6 years from today would be the present value of the dividends paid from year 7 onwards.

Latcher AB Is a Relatively New Firm That Is Still