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Dividends are expected to grow at a constant rate of 4 for

Modem Development, Inc. paid a dividend of $5.00 per share on its common stock yesterday. Dividends are expected to grow at a constant rate of 4% for the next two years, at which point the stock is expected to sell for $56.00. If investors require a rate of return on Modem's common stock of 18%, what should the stock sell for today?

a. $44.76
b. $48.51
c. $50.22
d. $40.22

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Accounting Basics: Dividends are expected to grow at a constant rate of 4 for

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