The Double Dip Co

Multiple Choice

The Double Dip Co.is expecting its ice cream sales to decline due to the increased interest in healthy eating.Thus,the company has announced that it will be reducing its annual dividend by 5% a year for the next two years.After that,it will maintain a constant dividend of €1 a share.Two weeks ago,the company paid a dividend of €1.40 per share.What is this equity worth if you require a 9% rate of return?

A) €10.86
B) €11.11
C) €11.64
D) €12.98
E) €14.23