Question: USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM

Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to grow at a rate of 9 percent per year for the next three years. After that dividends are expected to grow at a normal rate of 5 percent per year. Assume that the appropriate discount rate is 7 percent.

The present value today of dividends for years 1 to 3 is

a. $4.67. b. $3.08. c. $4.5. d. $1.53. e. $5.67.

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