The Watts company announced today that they plan to start paying annual dividends. The first dividend will occur one year from today in the amount of $.35 per share. Over the subsequent three years, the annual dividend will be $.40, $.55, and $.70 a share, respectively. After that, dividends are expected to grow at 2.5% per year indefinitely. After assessing the risk of Watts, you believe a discount rate of 12% is appropriate. How much are you willing to pay at maximum to buy one share of this stock?

Select one:

a. $5.92

b. $5.47

c. $5.82

d. $6.27

e. $6.03