The Electric Company is growing quickly, with current annual increases of 20% per year in both sales and net income. To fund its growth, it is reinvesting all of its net income each year in new productive opportunities (payout ratio = 0). Yesterday, the firm reported net income of $2.00 per share. This growth is expected to last for another five years (to the end of year 5 on the timeline), at which time they will have exploited most of the available high growth opportunities. The growth rate in net income will then fall to 5% and the firm will adopt a payout ratio of 50% with the first dividend paid at time period 6. If shareholders require a 15% return to hold the firms shares, how much would you expect each share to sell for today?

$15.87

$26.20

$14.68

$12.98