You are considering the purchase of a common stock that paid a dividend of $2.00 yesterday. You

expect this stock to have a growth rate of 15 percent for the next 3 years, resulting in dividends of
D1 = $2.30, D2 = $2.645, and D3 = $3.04.

The long-run normal growth rate after year 3 is expected
to be 10 percent (that is, a constant growth rate after year 3 of 10% per year forever). If you require
a 14 percent rate of return, how much should you be willing to pay for this stock?
A) $89.75 B) $56.46 C) $62.57 D) $83.65

C