Sorry, never mind, silly me had P/Y on 2…please ignore post. Guys, the following: A firm will not pay dividends until four years from now. Starting in year four dividends will be $2.20 per share, the retention ratio will be 40%, and ROE will be 15%. If k = 10%, what should be the value of the stock? A) $41.32. B) $55.25. C) $55.46. D) $58.89. g = ROE × retention ratio = ROE × b = 15 × 0.4 = 6% Based on the growth rate we can calculate the expected price in year 3: P3 = D4 / (k − g) = 2.2 / (0.10 − 0.06) = $55 This is what i dont understand… Schweser says… The stock value today is: P0 = PV (55) at 10% for 3 periods = $41.32 I get a value of $47.51 …i must be be something wrong but i dont know what? any suggestions? Thanks

I was following this could you please clarify this part P3 = D4 / (k − g) = 2.2 / (0.10 − 0.06) = $55 Tks