The Textbook Production Company has been hit hard due to increased competition. The company’s analysts predict that earnings (and dividends) will decline at a rate of 5 percent annually forever....

The Textbook Production Company has been hit hard due to increased competition. The company’s analysts predict that earnings (and dividends) will decline at a rate of 5 percent annually forever. Assume that r_s
= 11 percent and D_o
= $1.00. What will be the price of the company’s stock three years from now?

1. a) $27.17


2. b) $ 5.09


3. c) $28.50


4. d) $10.18


5. e) $20.63