Answer:
The correct answer is $25.32.
Explanation:
According to the scenario, the given data are as follows:
Dividend for 1st year( D1) = $3.60
Dividend for 2nd year (D2)= $28
Discount rate (r)= 12.5%
So, we can calculate the current value per share by using following formula:
Current value= (D1 ÷ (1+r)^1) + (D2 ÷ (1+r)^2 )
= ($3.60÷(1+12.5%)^1) + ($28÷(1+12.5%)^2 )
= ($3.60 ÷ 1.125) + ( $28 ÷ 1.265625)
= $3.2 + $22.123
= $25.32
