Exhibit 20-7 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Multiple Choice

Exhibit 20-7
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow at a rate of 9% per year for the next three 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 20-7. What is the future price of the stock in year 3?

A) $81.75
B) $84.81
C) $92.56
D) $101.85
E) $111.16