The share of XYZ company is expected to distribute 2$ dividend a year from now, 3.5$ dividend 2 years from now and 4.5$ dividend 3 years from now. It is also expected that the share price will be equal to 60$ at the year 3. If the required rate of return on this share is 12%, what is the price right now? Select one: a.40.85 b.50.48 c.45.15 d.53.10

D1 = Dividend in year 1 = $2

D2 = Dividend in year 2 = $3.5

D3 = Dividend in year 3 = $4.5

P3 = Price in year 3 = $60

r = Required return = 12%

Current share price = [D1 / (1+r)^1] + [D2 / (1+r)^2] + [D3 / (1+r)^3] + [P3 / (1+r)^3]

= [$2/(1+12%)^1] + [$3.5 / (1+12%)^2] + [$4.5/(1+12%)^3] + [$60/(1+12%)^3]

= [$2/1.12] + [$3.5/1.2544] + [$4.5/1.404928] + [$60 / 1.404928]

= $1.785714286 + $2.790178571 + $3.203011115 + $42.70681487

= $50.48571884

Therefore, price of stock right now is $50.48

Option b is correct