What is the highest price analyst trunk thinks

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Question - The company paid a dividend of $1.46 per share quarterly, totaling to $5.84 for the most recent full year, on its common stock. Based on a study of the risk of owning this stock, analysts at Walnut Investment Funds have determined that the required annual rate of return should be ke or r = 8.6%. Finally a fourth analyst, Mr. Trunk, considers the strength of Tupelo Turbine's product lines in growing international markets. He has adopted the expectation that earnings and dividends will grow by 27% in year 1, by 17% in year 2, and by 10% in year 3, before leveling off to a fairly steady pattern that can sensibly be modeled as 2.2% constant annual growth in year 4 and all following years. Under this set of assumptions, what is the highest price analyst Trunk thinks the Walnut funds should be willing to pay for a share of Tupelo Turbine Corporation's common stock?

A. $138.36

B. $174.07

C. $90.45

D. $131.22

E. $140.65

Reference no: EM132958801

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