USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 46

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8 percent per year for the next five years. After that dividends are expected to grow at a normal rate of 5 percent per year. Assume that the appropriate discount rate is 7 percent.
-Refer to Exhibit 8.3. The present value today of dividends for years 1 to 5 is

• A) $4.06.
• B) $10.28.
• C) $12.40.
• D) $14.52.
• E) $10.0.