Problem:

The Canning Company has been hard hit by increased competition. Analysts predict that earnings and dividends will decline at a rate of 5 percent annually into the foreseeable future.

Required:

If Canning's last dividend (D) was $2.00, and investors' required rate of return is 15 percent, what will be Canning's stock price is 3 years.

a.) $9.00

b.) $10.96

c.) $10.00

d.) $9.50

e.) $9.15

Note: Please show how you came up with the solution.