Exhibit 20-7 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 59

Multiple Choice

Exhibit 20-7
USE THE FOLLOWING INFORMATION FOR THE NEXT 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 20-7. What are the dividends for years 1, 2, and 3?

• A) $1.5, $2.0, $2.05
• B) $1.64, $1.78, $1.94
• C) $1.64, $1.94, $2.24
• D) $1.5, $2.40, $3.30
• E) $2.07, $2.14, $2.21

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