Problem: Sharon's Music just announced that they will commence paying annual dividends next year. They plan to pay $1.00 a year for three years, $1.20 a year for the following two years, and then cease paying dividends.
Required:
Question: How much is one share of this stock worth to you today if you require a 10% rate of return? Please show steps how you get an answer and please be clear in your explanation.
a. $4.05
b. $3.87
c. $3.71
d. $3.35
e. $5.40