One year ago Indigo Company paid a $4 dividend,and during the current year it has experienced a 10% growth rate.The company just paid a dividend of $4.40,i.e.,D(o) = 4.40.Due to a new,advanced production technique,Indigo expects to achieve a dramatic increase in its short-term growth rate,to 25% annually for the next 3 years.After this time,growth is expected to return to the long-run constant rate of 10%.If investors require a 15% rate of return,at what price should the stock of Indigo Company be selling today? (Round to the nearest whole dollar.)
A) $140
B) $181
C) $126
D) $110
E) $157
Correct Answer:
Verified
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