Q2, 10.

Please show work, preferably on financial calculator and any formula used. I need to know how to get the answer.

8.5.5

An analyst is attempting to value shares of the Graystone Company. The company has just paid a dividend of $0.70 per share. Dividends are expected to grow by 20 percent next year and 15 percent the year after that. From the third year onward, dividends are expected to grow at 5.5 percent per year indefinitely. Using what you know about stock valuation and the Dividend Discount Model and given a required rate of return of 8 percent, the value of the stock is closest to: Select one: a. $40.00 b. $31.33 c. $38.58 d. $34.06 e. $36.56