Final answer:
The value of the stock is $100.
Step-by-step explanation:
To find the value of the stock, we need to calculate the present value of all the future dividends. Since the dividend is expected to increase by 8% every year, we can use the formula for the present value of a growing perpetuity.
The formula is:
PV = D / (r - g)
Where PV is the present value, D is the dividend, r is the required rate of return, and g is the growth rate.
In this case, the dividend is $3, the required rate of return is 11%, and the growth rate is 8%.
Plugging in the values, we get:
PV = 3 / (0.11 - 0.08) = 3 / 0.03 = $100
Therefore, the value of the stock is $100.