Neco 2022 Commerce Question 8

Practice objective / multiple choice question 8 from the 2022 Neco Commerce examination.

Neco 2022 Commerce Objective / Multiple Choice Hard Difficulty
Question 8 NECO • 2022 • COMMERCE • objective

A company's share is currently priced at \(\text{₦}850\). The most recent dividend paid was \(\text{₦}45\). Assuming a constant dividend growth rate \(g\) and a required rate of return of 12% per annum, use the Gordon growth model to find the implied growth rate \(g\). Then, using this growth rate, calculate the expected share price at the end of year 5.

Answer Options

A. Growth rate ≈ 7.00%; Price at end of year 5 ≈ ₦1,250
Correct Answer B. Growth rate ≈ 6.37%; Price at end of year 5 ≈ ₦1,157
C. Growth rate ≈ 5.50%; Price at end of year 5 ≈ ₦1,080
D. Growth rate ≈ 6.00%; Price at end of year 5 ≈ ₦1,130
Correct Answer
B
Correct Option:
Growth rate ≈ 6.37%; Price at end of year 5 ≈ ₦1,157

About This Question

This is Neco 2022 Commerce Question 8. It is one of the objective questions from the 2022 Neco Commerce examination.

Difficulty level: Hard .

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