Balloons Inc normally pays a quarterly dividend. The last such dividend paid was $1.35, all future quarterly dividends are expected to grow at 5 percent, and the firm faces a required rate of return on equity of 12 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $2.55 per share that is not expected to affect any other future dividends, what should the stock price be?

Multiple Choice

• $20.25

• $19.94

• $12.75

• $21.26