$35.50 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today?
A) $37.86
B) $38.83
C) $39.83
D) $40.85
E) $41.69

Question

Quizplus · Accepted Answer

$\begin{array}{l}
\begin{array} { l } 
\text { Stock price } \
\text { Growth rate } \
\text { Years in the future } \
P _ { 3 } = P _ { 0 } ( 1 + g ) ^ { 3 } =
\end{array}
\begin{array} { r } 
\$ 35.50 \
5.50 \% \
3 \
\$ 41.69
\end{array}
\end{array}$

$3550 Per Share Is the Current Price for Foster Farms