The stock will pay no dividends for 2 yrs. The dividend 3 yrs from now is expected to be $1. Dividends are expected to grow at a 7% rate from that point onward. If an investor requires a 17% return on this investment, how much will the investor be willing to pay for this stock now? A. $6.24 B. $7.31 C. $8.26 D. $10.00 I reallly should be able to get this at this stage…

/

P2= D3/(k-g) = 1/(.17-.7) = 10 P0= P2/(1+k)^2 = 10/(1.17)^2 = 7.31 B

B 1/(.17-.07) = $10 PV of $10 today is $7.31

B it is…cheers!