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Suppose you expect Longs Drug Stores to pay an annual dividend of $5 per share in the coming year and to trade $37 per share

Suppose you expect Longs Drug Stores to pay an annual dividend of $5 per share in the coming year and to trade $37 per share at the end of the year. If investments with equivalent risk to Longs' stock have an expected return of 5%, what is the most you would pay today for Longs' stock?

A.

$38.00

B.

$42.00

C.

$40.00

D.

$36.00

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