Berberich Corporation net income this year is $800,000. The company generally retains 35% of net income for reinvestment. The company's common equity currently has a book value of $5,000,000. They just paid a dividend of $1.37, and the required rate of return on this stock is 12%.
Required:
Compute the value of this stock if dividends are expected to continue growing indefinitely at the company's sustainable growth rate.
a) $22.61
b) $11.62
c) $4.35
d) $15.63
Note: Show all workings.