The Club Auto Parts Company has just recently been organized. It is expected to experience no growth for the next 2 years as it identifies its market and acquires its inventory. However, Club will grow at an annual rate of 5% in the third year and, beginning with the fourth year, should attain a 10% growth rate that it will sustain thereafter. The first dividend (D) to be paid at the end of the first year is expected to be $0.50 per share. Investors require a 15% rate of return on Club's stock. What is the current equilibrium stock price?

a. $12.43

b. $15.00

c. $8.75

d. $9.56

e. $ 5.00

The Club Auto Parts Company has just recently been organized. It is expected to experience no growth for the next 2 years as it identifies its market and acquires its inventory. However, Club will grow at an annual rate of 5% in the third year and, beginning with the fourth year, should attain a 10% growth rate that it will sustain thereafter. The first dividend (D1) to be paid at the end of the first year is expected to be $0.50 per share. Investors require a 15% rate of return on Club's stock. What is the current equilibrium stock price? a. $12.43 b. $15.00 c. $8.75 d. $9.56 e. $5.00