A. $53.88
First we will compute year 1 value of the stock and then discount this back one year to get the present value of the stock price.
P1 = D1 / (rs - g)
P1 = $1.25 / (0.16 - 0.14)
P1 = $62.50
Current value of the stock = $62.50 / 1.16
Current value of the stock = $53.88
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