15.

Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8 percent per year for the next five years. After that dividends are expected to grow at a normal rate of 5 percent per year. Assume that the appropriate discount rate is 7 percent. Refer to Exhibit 8.3. The price of the stock today (P₀) is

a. $126.60.

b. $136.29.

c. $123.43.

d. $120.33.

e. $133.03.