McPherson Enterprises Is Planning to Pay a Dividend of $2

Multiple Choice

McPherson Enterprises is planning to pay a dividend of $2.25 per share at the end of the year . After that time the dividends will grow at a constant rate of 5 percent per year. If the required return on the company's common stock is 11 percent per year, what is the current stock price?

A) $52.50
B) $40.41
C) $37.50
D) $50.00
E) $32.94