A firm is planning on paying its first dividend of $2 three years from today. After that, dividends are expected to grow at 6% per year indefinitely. The stock's required return is 14%. What is the intrinsic value of a share today?
A. $25
B. $16.87
C. $19.24
D. $20.99
C. $19.24
Intrinsic value at time 2 = $2/(.14 - .06) = $25
Intrinsic value today = $25/(1.14) 2 = $19.24
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