A firm is expecting a:

$5 dividend to be paid to shareholders in one year (t=1);

$7 dividend the year after (t=2); and from then on the

2% inflation rate is the expected growth rate of the annual dividend which will be paid annually forever;

10% pa required return on equity. All returns and cash flows are given as nominal figures.

Estimate the current stock price. The stocks current price is estimated to be:

Select one:

a. $76.859504

b. $77.81405

c. $84.090909

d. $92.045455

e. $92.5