单选题
Cassie's Card Co. expects highly volatile earnings for the next four years, and then they expect earnings to level off to their normal rare of 8 percent. Dividends and earnings are expected to grow at 20% for years 1 and 2, -5% for year 3, and 15% in year 4. The last dividend paid by Cassie's was $ 2.00. If Jason Giggs requires a 12 percent return on Cassie's, the price he is willing to pay for the stock is closest to:
【正确答案】
B
【答案解析】
This is a supernormal or abnormal growth stock valuation problem. First, find the dividends in the supernormal growth period. Second, use the constant growth model to find the price in period 4. Finally, discount all of the cash flows back to time zero. D1=2.00×1.20=2.40; D2=2.4×1.2=2.88; D3=2.88×(1-0.05)=2.74; D4=2.74×1.15=5.15.
Discount each cash flow back to time zero at
a rate of 12% and 
This is a supernormal or abnormal growth stock valuation problem. First, find the dividends in the supernormal growth period. Second, use the constant growth model to find the price in period 4. Finally, discount all of the cash flows back to time zero. D1=2.00×1.20=2.40; D2=2.4×1.2=2.88; D3=2.88×(1-0.05)=2.74; D4=2.74×1.15=5.15.
Discount each cash flow back to time zero at
a rate of 12% and