Answer:
option C
Step-by-step explanation:
given,
share of common stock paid dividend of $3.00
for expected growth rate of 5 %
investor requirement of return is 11 %
price of the stock = ?
Next year dividend = last year dividend × (1 + growth rate)
= 3 × ( 1 + 0.05)
= 3.15
Current price = next year dividend / (required return -long term growth rate)
= [tex]\dfrac{3.15}{0.11 - 0.05}[/tex]
= $ 52.5
the price of the stock should be equal to $ 52.5.
hence, the correct answer will be option C
