Compute the current price of the company stock

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Reference no: EM1360190

Mack Industries just paid a dividend of $1.00 per share (i.e., D0 = $1.00). Analysts expect the company's dividend to grow 20 percent this year (i.e., D1 = $1.20), and 15 percent next year. After two years the dividend is expected to grow at a constant rate of 5 percent. The required rate of return on the company's stock is 12 percent. What should be the current price of the company's stock?

A. $12.33
B. $16.65
C. $16.91
D. $18.67

Reference no: EM1360190

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