The Red Bud Co

Multiple Choice

The Red Bud Co. just paid a dividend of $1.20 a share. The company announced today that it will continue to pay this constant dividend for the next 3 years after which time it will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 7%?

A) $2.94
B) $3.15
C) $3.23
D) $3.44
E) $3.60