Use the gordon model to estimate the expected price

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Reference no: EM131974976

Holly is considering purchasing a new car for $30,000. The dealer is offering two mutually exclusive options on the purchase: o Option 1: Receive a $2,000 rebate on the price of the car and finance the balance over 5 years at 4% interest, or o Option 2: Finance the vehicle for 7 years at 0% interest with no rebate. Which of the following options should Holly select if her goal is to minimize the total amount she pays for the car?

Option 1 is better.

Option 2 is better.

Both options cost the same.

There is not enough information to answer the question.

2. Use the Gordon Model to estimate the expected price, E(P0), of the following stock:

Quarterly dividend per share 5 years ago: $3

Quarterly dividend per share just paid: 3.829

Required rate of return of the stock: 20%

a. $107.21

b. $98.03

c. $101.72

d. $104.87

e. $110.77

Reference no: EM131974976

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