Consider a Firm That Had Been Priced Using a 12

Multiple Choice

Consider a firm that had been priced using a 12 percent growth rate and a 16 percent required return. The firm recently paid a $5.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12.5 percent rate. How much should the stock price change (in dollars and percentage) ?

A) $21.50; 13.72 percent
B) $21.50; 16.14 percent
C) $20.71; 14.79 percent
D) $20.71; 19.93 percent