单选题 Day and Associates is experiencing a period of abnormal growth. The last dividend paid by Day was $0.75. Next year, they anticipate growth in dividends and earnings of 25 percent followed by negative 5 percent growth in the second year. The company will level off to a normal growth rate of 8 percent in year three and is expected to maintain an 8 percent growth rate for the foreseeable future. Investors require a 12 percent rate of return on Day.
What is the approximate amount that an investor would be willing to pay today for the two years of abnormal dividends?

A、 $1.55.
B、 $1.83.
C、 $1.62.

【正确答案】 A

【答案解析】First find the abnormal dividends and then discount them back to the present.
$0.75×1.25=$0.9375×0.95=$0.89.
D ₁ =$0.9375; D ₂ =$0.89.
At this point you can use the cash flow keys with CF ₀ =0, CF ₁ =$0.9375 and CF ₂ =$0.89.
Compute for NPV with I/Y=12. NPV =$1.547.
Alternatively, you can put the dividends in as future values, solve for present values and add the two together.