26.

Exhibit 8.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM 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 future price of the stock in year 5 is

a. $142.85.

b. $132.27.

c. $113.40.

d. $154.35.

e. $122.47.