Homework Answers
Value of stock is equal to the present value of all future dividends
= 3/(1.13)^2 + 3*(1.5)/(1.13)^3 + 3(1.5)^2/(1.13)^4 + 3(1.5)^3/(1.13)^5 + 3(1.5)^3(1.07)/(1.13)^5(13%-7%)
= $113.1056
i.e. $113.11
Hence, the answer is D.
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