Exhibit 11.7 Use the Information Below for the Following Problem(S)

question 60

Multiple Choice

Exhibit 11.7
Use the Information Below for the Following Problem(S)
Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow at a rate of 9% per year for the next three years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
-Refer to Exhibit 11.7.The present value today of dividends for years 1 to 3 is

• A) $4.67
• B) $3.08
• C) $5.67
• D) $4.5
• E) $1.53

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