Exercise Bicycle Company Is Expected to Pay a Dividend in Year

Multiple Choice

Exercise Bicycle Company is expected to pay a dividend in year 1 of $1.20, a dividend in year 2 of $1.50, and a dividend in year 3 of $2.00. After year 3, dividends are expected to grow at the rate of 10% per year. An appropriate required return for the stock is 14%. The stock should be worth _______ today.

A) $33.00
B) $39.86
C) $55.00
D) $66.00
E) $40.68