A company has just paid its first dividend of $1.27. Next year's dividend is forecast to grow

Fantastic news! We've Found the answer you've been seeking!

Question:

A company has just paid its first dividend of $1.27. Next year's dividend is forecast to grow by 6 percent, followed by another 6 per cent growth in year two. From year three onwards dividends are expected to grow by 2.7 percent per annum, indefinitely. Investors require a rate of return of 14 percent p.a. for investments of this type. The current price of the share is (round to nearest cent)

Select one:

a. $12.26

b. $11.16

c. $6.12

d. $6.49