A Fast Growing Firm Recently Paid a Dividend of $1

Multiple Choice

A fast growing firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a 25 percent rate for the next three years. Afterwards, a more stable 8 percent growth rate can be assumed. If a 10 percent discount rate is appropriate for this stock, what is its value?

A) $12.50
B) $75.93
C) $83.13
D) $120.24