Question 3 (1 point)

You are using the dividend discount model to value a Canadian bank which is expected to generate a 12% return on equity in perpetuity. The bank paid dividends of $52 million on net income of $130 million in the most recent year and is expected to maintain high growth for the next 5 years, before settling into stable growth, growing 4% a year in perpetuity. If the cost of equity is 8%, estimate the terminal value at the end of year 5.

Question options:

a)	$3,588.79 million
b)	$2,171.10 million
c)	$3,190.06 million
d)	$1,914.04 million
e)	$191.40 million