1.

A. shortly after the Spahr cosmetics went public, the management announced the following dividends policy. Dividends at year 1= $ 1. Dividends at year 2 = $ 1.5. Dividends at year 3 = $ 1.9. and after that the company is expected to increase its annual dividends by 3% indefinitely. What is the stock price estimate at that time if the required rate of return was 7%?

1. $ 41.12
2. $ 43.73
3. $ 38.77
4. $ 23.73

B. at the beginning of 2017, Spahr cosmetics dividends just paid was $ 1.96. Digital Studios expected to grow at a higher rate and the management wanted to share the good days with shareholders. Spahr cosmetics decided to increase dividends by 5% annually. What is the stock price today if the required rate of return is 7%?

1. $ 98
2. $ 29.4
3. $ 102.9
4. $ 41.16