Problem:
Firm X is expected to pay its first annual dividend 5 years from now. That payment will be $3.10 a share. Starting in year 6, the company will increase the dividend by 2 percent per year. The required return is 15 percent. What is the value of this stock today?
1. $11.86
2. $12.09
3. $13.63
4. $14.66
5. $15.71