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
Question 2
Terminal cash flows are always positive because they result from the shutting down of a project
with the sale of any assets with remaining value.
Indicate whether the statement is true or false
