QUESTION 1

A company just paid a dividend of $1.40 per share. The consensus forecast of financial analysts is a dividend of $1.60 per share next year, $2.30 per share two years from now, and $2.60 per share in three years. You expect the price of the stock to be $25 in two years. If the required rate of return is 9% per year, what would be a fair price for this stock today? (Answer to the nearest penny.)