Problem:
Lee & Chan Imports paid a $1.00 per share annual dividend last week. Dividends are expected to increase by 5 percent annually.
Required:
Question: What is one share of this stock worth to you today if the appropriate discount rate is 14 percent?
a. $ 7.14
b. $ 7.50
c. $11.11
d. $11.67
e. $12.25
Note: Provide support for your underlying principle.