Dolci's Theme Parks Currently Pays a $1

Dolci's Theme Parks currently pays a $1.00 common stock dividend. Dividends have been growing at a 5% annual rate and are expected to continue growing at this rate for the next 2 years. Thereafter the growth rate is expected to be 0% for the foreseeable future. What is the current value of Dolci common stock to an investor requiring a 16% rate of return?

A) $6.03
B) $9.55
C) $6.85
D) $6.56

Correct Answer:

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