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 price of the stock today (P?) ?

A) $136.29
B) $133.03
C) $120.33
D) $123.43
E) $126.60