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

question 20

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 future price of the stock in year 3 is

• A) $81.75
• B) $84.81
• C) $92.56
• D) $101.85
• E) $111.16

---

Definitions:

Controllable Variance

The difference between actual and expected outcomes that can be directly managed or influenced by a responsible party.