Question

An analyst has been following American Dream stock. He projects the following dividends for the next

three years:

YEAR – Dividend

1 $2.00

2 $2.55

3 $3.00

The analyst notes that American Dream stock has a required return of 9.7%. The analyst projects that dividends will grow at a constant rate of 3% per year after year 3. What is the current price of the stock if his assumptions are correct?

A. 39.03

B. 44.78

C.37.21

D.6.21

E. 41.15

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