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    Finance: Club Auto Parts' required rate of return. What should be the price of the stock

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    Club Auto Parts' last dividend was $0.50, and the company expects to experience no growth for the next 2 years. However, Club will grow at an annual rate of 5 percent in the third and fourth years, and, beginning with the fifth year, it should attain a 10 percent growth rate which it will sustain thereafter. Club has a required rate of return of 12 percent. What should be the price per share of Club stock at the end of the second year?

    $19.98
    $25.06
    $31.21
    $19.48
    $27.55

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    Solution Summary

    In Excel, the solution calculates the price of the stock

    $2.19

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