Exhibit 20-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Multiple Choice

Exhibit 20-6
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
-Refer to Exhibit 20-6. What is the present value today of dividends for years 1 to 5?

A) $4.06
B) $10.28
C) $12.40
D) $14.52
E) $10.0