ABC Inc. is expected to pay a dividend of $2.25 in the coming year (D1 = $2.25). The company will increase its dividend payment at a growth rate of 4 percent every year indefinitely (g = 4.0%). If the required rate of return on the stock is 6%, what is the current value of the company’s stock?
1. $225.00
2. $56.25
3. $112.50
4. $$118.13
5. $37.50